Consumer Reports Index Shows a Significant Improvement in the Economic Lives of Consumers

Mar 08, 2011, 11:01 ET from Consumer Reports

Consumer sentiment hits positive territory as financial difficulties show sharp decline

YONKERS, N.Y., March 8, 2011 /PRNewswire-USNewswire/ -- Despite international unrest and escalating energy prices, the March Consumer Reports Index reveals its most positive results in two years. A major decline in consumer financial troubles and positive sentiment provide some encouraging news for the American Consumer.

Consumers have seen real improvements in their economic life in the past month. The Consumer Sentiment Index has broken into positive territory at 50.3, which is up from 48.7 a month ago. This is the first time sentiment has been in positive territory since it was first measured in October 2008.

Driving the gain in consumer sentiment, the Consumer Reports Trouble Tracker Index, which is the measure of the financial difficulties faced by consumers, fell sharply to 44.8, down nearly 10 points from the prior month (58.7). The Trouble Tracker Index is now at its lowest level since it was first reported in April 2008. Declines were evident for a wide range of reported financial difficulties in the past 30 days.

The Consumer Reports Stress Index, a measure of the stress consumers feel in their everyday lives versus a year ago, is also down slightly in March to 58.7 from 59.3 the prior month, though it is up from the prior year (57.7). The survey results about consumer spending still have not shown the same optimism.

"The March index provides the most encouraging results that we have seen since we started the index more than two years ago," said Ed Farrell, a director of the Consumer Reports National Research Center. "Consumers may be feeling that they are finally makes strides in the right direction when it comes to their financial well-being."

Though broad improvements were evident, the proportion of consumers missing a mortgage payment in the past 30 days has been on the rise over the past several months and is now at 3.1%, up from 2.0% in December.

After remaining locked at 49.2 for the past three months, the Consumer Reports Employment Index is up slightly to 49.7, and is also up versus one year ago (48.7). Weak job growth remains the core problem with employment. The improvement in the Employment Index this month was the result of a drop in job losses in the past 30 days (5.3%) versus the prior month (6.7%); however job creation remains weak, with 4.6% starting a new job in the past 30 days, down slightly from the prior month (5.2%).

Consumers are holding onto their money despite improvements in the Sentiment and Trouble Tracker indices. The Consumer Reports Past 30-Day Retail Index, reflecting February activity, is 10.5, down slightly from both the prior month (11.6) and a year ago (11.1). The Consumer Reports Next 30-Day Retail Index, reflecting planned purchasing in March, also dropped to 7.6 from 8.3 last month, though it remains about even with one year ago (7.3).

"Despite the decline in consumer financial troubles and positive sentiment, consumers are still holding on to their money," said Farrell. "If the employment picture improves, it may be enough for consumers to feel confident opening their wallets again."

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: 50.3*

  • Consumer Sentiment Index has broken into positive territory at 50.3 and is up significantly from 48.7 a month ago. This is the first time sentiment has been in positive territory since it was first measured in October 2008.
  • The most optimistic consumers: Age 18-34 at 57.4 (up from 55.5 the prior month), and households with income of $100K or more at 59.9 (down slightly from 61.5 a month earlier). The most pessimistic consumers: Households with income less than $50,000 at 43.2 (down slightly from 44.2 the prior month), and those age 65 and older at 42.6 (up slightly from 41.9 a month earlier).

* 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: 44.8*

  • Consumers faced fewer troubles this month than last. The index fell to 44.8 in March, from February's 58.7. The Trouble Tracker Index is now at its lowest level since it was first released in April 2008.
  • Declines were evident for a wide range of reported financial difficulties in the past 30 days. The sharpest declines compared to the prior month included: Unable to afford medical bills or medications (11.4%), down 5.6% points; Lost or have reduced health care coverage (5.7%), down 3.6% points; Missed payment on a major bill -- not including mortgage (8.3%), down 1.4% points.
  • Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 16% Unable to afford medical bills or medications; 13% Missed payment on a major bill (not a mortgage); and 10% faced negative changes to their credit card terms in increased interest rates, penalty fees, etc..
  • Though broad improvements were evident, the proportion missing a mortgage payment in the past 30 days has been on the rise over the past several months, and is now at 3.1% up from 2.0% in December.

* 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 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 10.5, Next 30-Day – 7.6*

  • The Consumer Reports Past 30-Day Retail Index for March, reflecting February activity, is 10.5, down slightly from both the prior month (11.6), as well as a year ago (11.1). The Next 30-Day Retail index*, reflecting planned purchasing in March, is also down, standing at 7.6 versus 8.3 the prior month, though it remains about even with one year ago (7.3).
  • Looking in detail at the categories comprising the Past 30-Day Retail Index (major appliances, small appliances, major home electronics, personal electronics,  major yard/garden equipment), all categories but one were flat or down slightly. Major yard/garden equipment posted an increase.
  • Among the non-index categories*, past 30-day purchases, reflecting February activity, are down versus a year ago for both new cars (1.5% vs. 3.3%) and used cars (3.3% vs. 5.8%), while home purchasing (1.5% vs. 1.5%) was unchanged. Planned purchasing in March is up slightly versus one year ago for both new cars (1.9% vs. 1.1%) and used cars (5.1% vs. 3.5%), while homes is down slightly (0.9% vs. 1.5%).

* 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: 49.7*

  • The Employment Index is up slightly to 49.7 after being locked at 49.2 for the past three months, and is also improved from one year ago (48.7). In the past 30 days, the proportion of Americans that have lost their job is 5.3%, down from a month earlier (6.7%). The number of Americans that have started a job in the past 30 days (4.6%) is down slightly from a month earlier (5.2%), but is much improved from one year ago (3.5%).

* 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 level of stress consumers feel they are under is down slightly in March to 58.7 from 59.3 the prior month, though it is up from the prior year (57.7).

* 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 1,269 interviews were completed (1,019 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between February 24 and February 27, 2011. The margin of error is +/- 2.8 percentage points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: Jeremy Gulish, 973-316-1665, jgulish@coynepr.com.

MARCH 2011

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