Consumers Remain Wary

June 14, 2011

consumer-reports-index-june-2011.JPGUS consumers remain wary of the economy, according to results of the June 2011 Consumer Reports Index. The Sentiment Index remained flat at 45.7 from May 2011, comparable with June 2010 (45).

Fears of Stalled Recovery Bring Down Financial Sentiment

As recently as April, the Sentiment Index reached positive territory with a score of 50.3. However, Consumer Reports says consumers fear the economic recovery is on the brink of stalling.

The most optimistic consumers are those age 18-34 at 56.9, and households with income of $100,000 or more at 54.8. The most pessimistic consumers: households with income less than $50,000 (42.2) and those who are age 65 and older (36).

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.

Trouble Tracker Index Also Stays Flat

The Consumer Reports Trouble Tracker Index was virtually unchanged at 48.6 in June, from May’s 48.3. The Trouble Tracker Index is still down substantially from February’s recent high of 58.7. The financial difficulties that were on the rise in the past 30 days were led by negative changes to credit-card terms (increased rates, penalty fees), at 7.2%, which was up 14% from 6.3% in May. Moreover, there was a significant 59% increase in the number of those who reported a missed mortgage payment (2.7%), up from 1.7%.

Overall, the most prevalent consumer trouble remains the inability to afford medical bills or medications, unchanged since last month at 14%. Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days, with 22.4% unable to afford medical bills or medications; 12.2% missed payment on a major bill (not a mortgage); and, 9.1% lost or reduced healthcare coverage.

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.

Troubles Up Everywhere Except Southeast

consumer-reports-trouble-tracker-june-20111.JPGLooking at month-over-month trends in troubles across the four main regions of the US, Consumer Reports finds the Southeast reported a major 9.5% drop. However, the other three regions all reported an uptick in troubles. The Northeast led the way with a 10.8% increase, followed by the West (7.8%), and very mild rise in the Midwest (0.1%).

Consumer Retail Behavior Struggles for Traction

consumer-reports-highlights-june-2011.JPGThe Consumer Reports Past 30-Day Retail Index, reflecting May activity, is 12, almost unchanged from the prior month (11.7). The Consumer Reports Next 30-Day Retail Index, reflecting planned purchasing in June, is also close to unchanged, standing at 9, compared to 8.2 the prior month.

Looking in detail at the categories comprising the Consumer Reports Past 30-Day Retail Index, June’s softness was the result of declines in personal electronics (22.1%), down 5% from 23.2% the prior month; and major home electronics (12.6%), down 7% from 13.6% a month earlier. Major appliances (9.4%) was up 9% from May (8.1%), and major yard/garden equipment, at 6.7%, was up 31% from 5.1% in May.

Among the retail categories not included in the index, past 30-day purchases, reflecting May activity, were up compared to the prior month for new cars (3.3%, up 83% from. 1.8%), used cars (4.8%, up 23% from. 3.9%), and homes (2.5%, up 31.5% from 1.9%).

Planned purchasing during the next 30 days, reflecting June activity across these categories, shows new cars depressed 25% compared to the prior month (1.8% vs. 2.4%), and homes down 18% (1.8% compared to 2.2%). Planned purchasing for used cars is up 15% in the next 30 days compared the prior month (4.6% compared to 4%).

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.

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