Consumer Troubles Fall from ’09

October 12, 2010

US consumers experienced significantly fewer economic troubles in October 2010 than October 2009, according to the latest Consumer Reports Index data.

Troubles Substantially Drop from October ’09
The Consumer Reports Trouble Tracker Index showed further improvement this month, pointing to fewer troubles for consumers, dropping to 50.5 in October 2010 from 53.7 in September 2010, and is down substantially from one year ago (65.5). Positive developments were led by a decline in consumers unable to afford medical care or medications, to 12.7% from 13.6% in September 2010; and a drop in the proportion of Americans who missed a payment on a major bill (8.7%), down from the prior month (9.3%).

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On the downside, in the past 30 days, 3% of consumers reported that they have missed a payment on their mortgage, up from 2.4% in September 2010. The leading problems faced by consumers include:

  • Unable to afford medical bills or medications (12.7%).
  • Missed payment on a major bill – not mortgage (8.7%).
  • Credit card increased rates/fees, reduced credit line (7.6%).

Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:

  • Unable to afford medical bills or medications (20.6%).
  • Missed payment on a major bill – not mortgage (14.4%).
  • Credit card increased rates/fees, reduced credit line (10.1%).

Regionally, Northeast residents actually experienced a 7.7% increase in financial problems, and residents of the West saw a more modest 2.5% increase. The other two main geographic areas of the US all saw financial problem s decrease, especially the Central region (11.2%), while the South saw a still impressive 7.2% reduction.

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.

Younger, Wealthier Consumers Most Optimistic
The Consumer Reports Sentiment Index has changed little since October 2009, and now stands at 44.8, slightly up from September 2010 (44.1). The most optimistic consumers are between the ages of 18-34 (54.3), and those with household incomes of $100,000 or more (51.2). The most pessimistic consumers are between the ages of 35-64 (41.9) and 65 or older (37.2), and those with household incomes less than $50,000 (40.9).

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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.

Electronics, Appliance Purchases Slightly Increase
The Consumer Reports Past 30-Day Retail Index for October 2010, reflective of September 2010 activity, is 9.9, on par with the prior month (9.8), but down compared to one year ago (10.4). Looking at the category purchases during the past 30 days, there were slight increases for personal electronics (23.2%, up 1.8 percentage points) and small appliances (18.5%, up 1.9 percentage points).

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Among the non-index categories for past 30-day purchases, new cars (3%) were up slightly compared to the prior month (1.7%), but used cars (4%) were down from the prior month (5.1%). Home purchases were off slightly (2%) relative to September 2010 (2.5%).

Meanwhile, the Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for October 2010, is at 7.4, posting three months of decline from July 2010’s recent high of 8.5, and also is down from a year ago (8.3).

Within the Next 30-Day Retail Index, only small appliances posted a slight gain from the prior month. Among non-index categories, new cars (2.2%) and used cars (3.3%) are holding steady relative to the prior month. Planned purchasing for homes (3%) in the next 30 days, reflecting planned October 2010 activity, is up versus the prior month (1.5%), and is at its strongest level of the past nine months.

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.

Deloitte Finds Flat Consumer Spending
The Deloitte Consumer Spending Index remained unchanged in August 2010 compared with July 2010, with a lack of improvement due primarily to housing and unemployment. The Index attempts to track consumer cash flow as an indicator of future consumer spending. The Index, comprising four components: tax burden, initial unemployment claims, real wages and real home prices, remained at 4.73%, steady with the previous month.

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