Consumer Spending, Sentiment Flat

July 13, 2010

US consumer spending and sentiment in June 2010 were essentially flat with May 2010, according to the new Consumer Reports Index.

Retail Spending Remains Level
The Consumer Reports Past 30-Day Retail Index for July 2010, reflective of June 2010 activity, is at 10.4, essentially unchanged from 10.8 in May 2010. Per capita spending for the index categories in the past 30 days was up slightly for July, reflecting June activity, to $274, from June’s $234. Though volume of purchasing is down, the value of purchases rose in July, particularly in the area of personal electronics and major home appliances.

The Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for June 2010, is at 8.5, even with the prior month (8.5). 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. Small appliances registered a small gain in July (17.4%) compared to June (15%) in the proportion of Americans buying in the past 30 days.

Among the non-index categories, past 30-day purchases, reflecting June activity, were down for new cars (1.7%) and used cars (4.8%) from the prior month, 3.2% and 5.8%, respectively. Home purchases were also down in July (2.3%) relative to June (3.1%), halting 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.

Financial Sentiment Stays Flat, Too
During the past four months, the Consumer Reports Sentiment Index has crept upwards, rising from 43.7 in April to 45.2 in July. Sentiment is virtually unchanged from the prior month (45) and up slightly from a year ago (43.2). The most optimistic consumers are between the ages of 18-34 years old (56.6), and with a household income of $100,000 or more (50.6). The most pessimistic are households with an income less than $50,000 (42.6), and Americans 65 or older (38.2).

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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.

Consumers Report Fewer Troubles
One area of improvement was the Trouble Tracker Index, which measures consumer financial difficulties and negative events. The Consumer Reports Trouble Tracker Index has shown a decline this month, pointing to fewer troubles for consumers, dropping to 57.6 in July from 63.5 in June. The most notable improvement was in the proportion of Americans that missed a mortgage payment, down to 2.4% from 3.9% the prior month.

Problems still ensue, however, including the proportion of Americans that were unable to afford medical bills or medications (16%) or lost or have reduced health-care coverage (8.9%). Difficulties in affording healthcare are well above levels seen in 2009. There is also a rise in Americans’ homes going into foreclosure in the past 30 days. Foreclosures were reported by 1.3% of consumers in June, capping three straight months of increases.

The most common difficulties faced by Americans are:

  • Unable to afford medical bills or medications (16.%), down from 16.4% in June.
  • Missed payment on a major bill – not mortgage (10%), up from 9.4% in June.
  • Lost or reduced healthcare coverage (8.9%), down from 9.3% in June.
  • One consumer difficulty has steadily diminished during the past several months. Reported negative changes to credit card terms has fallen to 8.1% in July from 9.5% in June, and is well below its high point of September 2009 (16.1%).

Lower-income Households Have Tougher Time
Lower-income households, classified as those earning less than $50,000 a year, have been disproportionately affected by financial problems. In the past 30 days:

  • 22.9% have been unable to afford medical bills or medications.
  • 12.5% lost or have reduced healthcare coverage.
  • 15.3% missed payment on a major bill – not mortgage.

7 in 10 Adults Don’t See Economic Improvement Coming
A combined seven in 10 US adults think the economy will stay flat or deteriorate in the coming year, according to the results of a new Harris Poll. As of June 2010, just three in ten US adults (30%) say they expect the economy to improve, while two in five (42%) say it will stay the same; 28% believe it will get worse.

In May 2010, almost two in five Americans (38%) said they thought the economy would improve in the coming year, while 34% said it would stay the same and 28% believed it would get worse.

About the Data: A total of 1,258 interviews were completed (1,007 telephone & 251 cell phones) among adults aged 18 and older. Interviewing took place between June 24 and June 27, 2010.

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