Consumer Reports Index: Financial Mood Grim, Despite Employment Edging Higher

Employment in positive territory for all income groups for first time since 2009

YONKERS, N.Y., Nov. 7, 2011 /PRNewswire-USNewswire/ -- November's Consumer Reports Index, a measure of overall consumer financial health, showed that as the holiday season approaches, there are some positive signs for the economy, though difficulties temper the outlook. Employment continued to show improvement, with job gains outpacing losses by a slight margin. The most potent risk on the horizon is declining sentiment, which fell to 45.0 from a recent high of 48.8 in September.

"Our short term outlook through the holiday season remains guarded, driven by a broad-based decline in consumer sentiment," said Ed Farrell, director of the Consumer Reports National Research Center. "Sentiment among wealthier Americans has plunged, while those earning less than $50,000 languish in negative territory, a bad convergence of events for spending."

The Consumer Reports Sentiment Index, which measures the percentage of how many consumers are doing better than a year ago, dropped to 45.0 from 47.6 in October. The decline in sentiment was widespread, down among those in households earning $100,000 or more, as well as those earning under $50,000. The drop among more affluent households was pronounced, falling from 61.4 at the beginning of this year to 52.7.

There continued to be small signs of optimism in the employment picture, as the Consumer Reports Employment Index improved for the third month in a row to 50.6, remaining in positive territory (over 50), with past 30-day job gains outpacing job losses. For the first time since April 2009, the Employment Index was in positive territory (over 50) for all income groups, including those in households earning less than $50,000, as well as those earning $100,000 or more.

The Consumer Reports Trouble Tracker, a gauge of the breadth and depth of financial difficulties among American households, remained virtually unchanged, at 50.0 from 49.7 in October. The Trouble Tracker did show a rise in some financial difficulties, including credit card difficulties, such as increased interest rates and fees, and the inability to afford medical bills or medications.

The retail indicators tracking recent and planned spending moved in opposite directions this month. The Consumer Reports Past 30-Day Retail Index was down to 9.1 from 11.3 in October. Boding well for the holidays, the Next 30-Day Retail Index at 11.1 was up from last month (9.3), and strong versus one year ago (8.0).

"Sinking consumer sentiment, which may cause consumers to hold back on spending this holiday season, could be offset by an improving employment picture and this seeming willingness for consumers to spend over the next 30 days," added Farrell.

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 Reports Sentiment Index is down slightly from last month (47.6) and below the 46.6 reported a year ago.
• The most optimistic consumers: age 18-34 at 54.5 is down substantially from 63.8 the month prior. Households with income of $100K or more at 52.8 is also down, from 57.5 in October. The most pessimistic consumers: households with income less than $50,000 (41.6) and those who are age 65 and older (37.3).  The decline in sentiment was broad-based, down among households earning $100,000 or more, as well as those earning under $50,000. This drop among more affluent households was pronounced, falling from 61.4 at the beginning of this year to 52.7.

* 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: 50.0*

• The Consumer Reports Trouble Tracker Index is 50.0 this month, unchanged from 49.7 the prior month, but is up from 45.3 in September. The predominant difficulties facing consumers were: inability to pay for medical bills or medications; missed payments on a major bill other than a mortgage; and, credit card difficulties, including increased rates and penalty fees. The Trouble Tracker Index is on par with last November's 49.3.
• The financial difficulties that were on the rise in the past 30 days were led by: credit card difficulties, such as increased interest rates and fees at 7.8%, up from 6.0% in October.
• The proportion of people who reported missing a mortgage payment was 2.9%, up from 2.0% in October and also up from 2.0% in November 2010.  
• Lower-income households, earning less than $50,000 a year, have been disproportionately affected.  In the past 30 days: 21.0% were unable to afford medical bills or medications, and 14.6% missed payment on a major bill (not a mortgage).

* The Consumer Reports Trouble Tracker Index 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 health-care 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 – 9.1, Next 30-Day – 11.1*

• Consumer retail behavior was down in past 30-day retail sales and up in next 30-day retail sales. The Consumer Reports Past 30-Day Retail Index*, reflecting October activity, is 9.1, down from 11.3 the prior month.  The Consumer Reports Next 30-Day Retail Index*, reflecting planned purchasing in November, increased to 11.1 from 9.3 the prior month.
• Taking a closer look at the categories comprising the Consumer Reports Past 30-Day Retail Index, the decline from October to November was the result of a decline for major appliances (4.9% vs. 8.6%), and major home electronics (10.4% vs. 12.3%).
• The Consumer Reports Next 30-Day Retail Index was 11.1, up from 9.3 in October. Improvements in planned purchasing were driven by personal electronics (22.5% vs. 17.1%), and major home electronics (14.7% vs. 11.7%).
• Among the retail categories not included in the index, past 30-day purchases, reflecting October activity, were down for both new cars at 3.0% and used cars at 4.6%. Past 30-day home purchasing (2.3%) was up versus last month (1.2%), but down from the same period last year (2.9%). Purchasing over the next 30 days, reflecting planned November activity, remained steady for new cars. Planned purchasing for used cars in the next 30 days is expected to drop to 3.5% versus 4.9%, and planned home purchasing in the next 30 days is expected to rise to 2.4% versus 0.7% the prior month.

* 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 Employment Index: 50.6*

• The Consumer Reports Employment Index rose for the third straight month to 50.6 and for the first time since April 2009, the Employment Index was in positive territory (over 50) for all income groups, including those in households earning less than $50,000, as well as those earning $100,000 or more.
• In the report, 5.6% said they started a new job in the past 30 days, compared with 4.4% that lost their job in the same period.

* 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.

Consumer Reports Stress Index: 58.7*

• The stress consumers felt did not change this month. The Stress Index stands at 58.7, unchanged from the prior month (58.3).  

*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).

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 1,019 interviews were completed (769 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between October 27 and October 30. The margin of error is +/- 3.2 percentage points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: Rachel Zuckerman 914-378-2417, [email protected].

Consumer Reports is the world's largest independent product-testing organization. Using its more than 50 labs, auto test center, and survey research center, the nonprofit rates thousands of products and services annually. Founded in 1936, Consumer Reports has over 8 million subscribers to its magazine, website and other publications. Its advocacy division, Consumers Union, works for health reform, food and product safety, financial reform, and other consumer issues in Washington, D.C., the states, and in the marketplace.

NOVEMBER 2011
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SOURCE Consumer Reports