Consumer Reports Index: American Consumer Falters

YONKERS, N.Y., June 8 /PRNewswire-USNewswire/ -- Months of modest improvements have been swept away, the latest numbers show consumers have taken a step back facing increases in financial difficulties and a soured employment picture, according to Consumer Reports Index June report.

The increase in Americans' financial difficulties is most apparent in June's Consumer Reports Trouble Tracker Index that measures financial difficulties faced by consumers in the past 30 days. The June Trouble Tracker worsened, rising to 63.5 from 53.0 in May. The most troubling increase is in missed mortgage payments, which reached 3.9%, its highest level since tracking began in April 2009, and is up significantly from May (2.5%).

Other financial difficulties also buffeted consumers. In June, more consumers reported difficulty in affording medical bills or medications versus the prior month (16.4%), up 2.7% pts.; and faced lost or reduced healthcare coverage (9.3%), up 1.4% pts. from May.

The Consumer Reports Employment Index has dropped, pointing to an increase in the ranks of the unemployed, at least temporarily. The index fell back to 49.4 from 50.6 in May. The decline was led by the proportion of Americans that lost their jobs in the past 30 days (8.6%), reaching its highest level since the inception of the Consumer Reports Index in April 2009. Job losses in June were up significantly from the prior month (4.9%). More churn is evident in the job market, which may bode well for the future. Despite the high job losses posted in June, 7.4% of Americans reported starting a job in the past 30 days, well above May (6.0%), and achieved its highest level recorded since April 2009.

Consumers have scaled back their interest in shopping as well. The Consumer Reports Past 30-Day Retail Index for June, reflective of May activity, is 10.8, unchanged from the prior month (10.9). May's Next 30-Day Retail Index, reflective of planned purchases for June, is at 8.5, down slightly from 9.0 the prior month. Per capita spending for the index categories in the past 30 days was $234, down slightly from May ($248).

"Tumultuous is an apt word to describe the consumer experience. This recovery will not be without personal and national setbacks," said Ed Farrell, a director of the Consumer Reports National Research Center. "A flat Retail Index suggests consumers are not spending freely."

The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress  Index,  the  Retail  Index,  and  the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index: 45.0

• Consumer Sentiment is unchanged from the prior month, 45.0 versus 44.6, respectively. Sentiment is up from its recent low in September 2009, but is down versus a year ago (48.5). The most optimistic consumers are between the ages of 18-34 (52.3), and with a household income of $100,000+ (54.9).  The most pessimistic are households with an income less than $50,000 (39.2) and Americans 65 or older (41.7).

The Consumer Reports Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. The Sentiment Index can vary from a high of 100 to a low of 0.

Consumer Reports Trouble Tracker Index: 63.5

• The Consumer Reports Trouble Tracker Index addresses both the proportion of consumers that have faced difficulties as well as the number of hurdles they have encountered. This index has shown a significant increase this month, pointing to more troubles for consumers, rising to 63.5 in June from 53.0 in May. The most troubling increase is in missed mortgage payments, which reached 3.9%, its highest level since tracking began in April 2009, and is up significantly from May (2.5%).
• Key financial difficulties faced by consumers this month included:
  • Unable to afford medical bills or medications (16.4%), up from 13.7% in May
  • Missed payment on a major bill – not mortgage (9.4%), up from 8.7% in May
  • Lost or reduced healthcare coverage (9.3%), up from 7.9% in May
• Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:
  • 28.1% Have been unable to afford medical bills or medications
  • 15.9% Lost or have reduced healthcare coverage
  • 13.7% Missed payment on a major bill – not mortgage
• One consumer difficulty has steadily diminished over the past several months. Reported negative changes to credit-card terms has fallen to 9.4% in June from 10.4% in May, and is well below its highpoint of September 2009 (16.1%).

The Consumer Reports Trouble Tracker focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered. The negative events include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest-rate increase, penalty fees, reduced lines of credit or other changes in credit-card terms, job loss or layoffs, reduced healthcare coverage, or the denial of personal loans. The Consumer Reports Trouble Tracker Index is then calculated as the proportion of consumers that have experienced at least one of the negative events comprising the index multiplied by the average number of events encountered.

Consumer Reports Retail Index: Past 30-Day – 10.8, Next 30-Day – 8.5

• Consumer Reports Past 30-Day Retail Index for June, reflective of May activity, is at 10.8, unchanged from 10.9 in May. Per capita spending on the categories comprising the Index is $234 in the past 30 days, down slightly from May ($248).
• June's Next 30-Day Retail Index, reflective of planned purchases for June, is at 8.5, down marginally from 9.0 the prior month.
• Looking in detail at the categories comprising the Retail Index (major appliances, small appliances, major home electronics, personal electronics, major yard/garden equipment), most categories were down slightly from the prior month. Only personal electronics registered a small gain in June (22.8%) versus May (20.8%).
• Among the non-index categories, past 30-day purchases, reflecting May activity, were up slightly for new cars (3.2%) and used cars (5.8%) from the prior month, 2.8% and 4.9%, respectively. Home purchases were up slightly in June (3.1%) relative to May (2.7%), capping three straight months of increases.

The Consumer Reports Retail Index looks at consumer purchases in the past 30 days as well as the outlook for planned purchases in the next 30 days across several categories. The Consumer Reports Retail Index represents the proportion of respondents that made a purchase in the following categories: major home appliances, small home appliances, major home electronics, personal electronics, and major yard and garden equipment. The Retail Index is a weighted calculation. For example, a major appliance is of greater value than a small appliance. Because of their size and frequency, car and home purchases are tracked separately.

Consumer Reports Stress Index: 57.6

• According to the Consumer Reports Stress Index, the level of stress consumers feel they are under (57.6) is down slightly compared to both the prior month (59.6), and is unchanged from one year ago (57.0).

The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (Total Stress) to a low of 0 (No Stress).

Consumer Reports Employment Index: 49.4

• The Consumer Reports Employment Index fell back to 49.4 from 50.6 in May. The decline was led by the proportion of Americans that lost their jobs in the past 30 days (8.6%), reaching its highest level since the inception of the Consumer Reports Index in April 2009.
• Job losses in June were up significantly from the prior month (4.9%). Despite the high job losses posted in June, 7.4% of Americans reported starting a job in the past 30 days, well above May (6.0%), and achieved its highest level recorded since the start of the Index in April 2009.

The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.

For more information regarding the Consumer Reports Index visit www.ConsumerReports.org.

The Consumer Reports Index, conducted by the Consumer Reports National Research Center is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,253 interviews were completed (1,003 telephone, 250 cell phones) among adults aged 18+. Interviewing took place between May 20 – May 23, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields, 914.378.2454, [email protected].

JUNE 2010

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SOURCE Consumers Union