Consumers Cautious in Face of Declining Troubles

September 14, 2010

This article is included in these additional categories:

Analytics, Automated & MarTech | Automotive | CPG & FMCG | Data-driven | Household Income | Retail & E-Commerce

The economy remains unsteady and Americans are cautious, but consumer troubles show signs of decline, according to the September 2010 Consumer Reports Index.

Troubles Down Sharply from Last Year
The Consumer Reports Trouble Tracker Index has shown a decline this month, pointing to fewer troubles for consumers, dropping to 53.7 in September 2010 from 56.6 in August 2010, and is down substantially from a year ago (68.7).

Positive developments were led by a decline in consumers losing or facing reduced healthcare coverage, to 6.7% from 9.7% in August; a drop in the proportion of Americans unable to afford medical bills or medications to 13.6% from 15.4% in August, and a slight reduction in the proportion of Americans that faced negative changes to their credit cards, down to 7.2% from 8.9% in August.

Lower-income households earning less than $50,000 a year, have been disproportionately affected. In the past 30 days, 22.4% Have been unable to afford medical bills or medications and 16.1% missed payment on a major bill – not mortgage.

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Regionally, troubles dropped substantially in the West (-26.3%) and Northeast (20%) while rising slightly in the North (2.5%) and more significantly in the South (16.5%).

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.

Sentiment Continues Slow Decline
The Consumer Reports Sentiment Index has gradually declined from 45.2 in July 2010 to 44.1 in September 2010. The most optimistic consumers are between the ages of 18-34 (49.9), along with households with an income of $100,000 or more (50.7). The most pessimistic consumers are between the ages of 35-64 (42.3) or age 65 and older (41.1), and households with an income less than $50,000 (40.4).

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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.

Spending Keeps Slowing
The Consumer Reports Past 30-Day Retail Index for September, reflective of August 2010 activity, is at 9.8, down from the prior month (11.4). Per capita spending for the past 30 days was down significantly for September, reflecting August activity, to $185, from $286 the prior month.

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The proportion of Americans buying across categories in the past 30 days showed the greatest declines in small appliances (16.6%, down 3.7 points), personal electronics (21.4%, down 3.5 points), and major home electronics (10.7%, down 2 points).

Among the non-index categories, past-30 day purchases, reflecting August activity, were down slightly for new cars (1.7%) compared to the prior month (2.2%), but up for used cars (5.1%) from the prior month (3.7%). Home purchases were up slightly in September (2.5%) relative to August (1.6%).

Meanwhile, the Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for September, is at 7.6, down from the prior month (8.1) as well as one year ago (8.8).

Among the non-index categories, next 30-day planned purchasing points to new cars declining slightly, 2.5% compared to 3.1% the prior month, and used cars also moving downward to 3.5% from 4.3% for August. Planned purchasing for homes in the next 30 days, reflecting September activity, is on par with the prior month (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.

Americans Fund Passions
Most Americans continue to spend money on key discretionary “passions” even as the recession continues, according to the American Express Spending & Saving Tracker. This month’s American Express Spending & Saving Tracker surveyed consumers on their spending habits across four popular areas of interest: food, electronics and gadgets, sports and fashion.

The majority (68%) of Americans say that since the recession began (most economists have pegged the recession as starting in Decemeber 2007), they did not decrease spending in the areas they are most passionate about. Of the four leading “passions,” food (60%) is most popular, followed by electronics and gadgets (35%), sports (34%), and fashion (25%).

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