Reduction in Consumer Troubles May Not Improve Spending

November 10, 2010

US consumers reported generally fewer financial troubles in November 2010 compared to the prior year, but do not plan to greatly increase spending as the holidays approach, according to the latest Consumer Reports Index.

Troubles Decline Significantly from November 2009

The Consumer Reports Trouble Tracker Index showed further improvement this month, pointing to fewer troubles for consumers (excepting healthcare), dropping to 49.3 in November from 50.5 in October, and is down substantially from a year ago (62.1).

Positive developments were led by a decline in the number of consumers that lost their job in the past 30 days to 4.9% from 6.7% in October 2010; a drop in the proportion of consumers that faced credit card rate increases or increased fees or reduced credit line, to 6% from 7.6% the prior month; and fewer consumers missing a mortgage payment (2%) compared to the prior month (3%).

On the downside, there were increases in some financial problems for consumers. This month, 14.5% reported they could not afford medical bills and medications, up from 12.7% the prior month. The number of those who lost or face reduced health care rose to 8.7% from 6.7%. Overall the most prevalent consumer troubles include: the inability to afford medical bills or medications (14.5%), missed payment on major bills, but not the mortgage (8.9%), and lost or reduced health care coverage (8.7%).

Regionally, consumers in the West saw a 9% spike in their troubles. However, consumers in other regions of the US all reported decreased incidences of financial problems, especially in the East, where troubles declined 10.6%.


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.

Planned Purchases May Indicate Soft Holiday Season

The Consumer Reports Past 30-Day Retail Index for November 2010 (reflective of October 2010 activity) is 10.9, up from the prior month (9.9), as well as a year ago (9). The Next 30-Day Retail Index, (reflecting planned purchases for November) is at 8 and is up slightly from last month (7.4), breaking three months of decline. However, planned purchases for November still lag one year ago (9). Per capita spending for the index categories in the past 30 days was $249, up from $212 the prior month.


Looking in detail at the categories comprising Consumer Reports Past 30-Day Retail Index, gains were attributable to an uptick in major appliance sales versus the prior month (9.2% compared to 7.1%, respectively), and gains in home electronics, up to 11.8% from 10% a month earlier.

The gain in planned purchases for November 2010 was attributable to an increase in buying personal electronics (18.2%), up from 16.1% a month earlier, and a gain in planned purchasing for small appliances (12.5%) versus the prior month (11.5%). But, planned purchasing of personal electronics this November (18.2%) is behind last November (24.9%) by a substantial margin. Considering the importance of this category to the holiday shopping season, this could point to a soft start this year.

Among the large ticket purchase not included in the Consumer Reports Retail Index categories, past 30-day purchases (reflecting October activity) were down compared to the prior month for both new cars (2.1% compared to 3%, respectively) and used cars (3% compared to 4%, respectively). Home purchases were up slightly (2.9%) relative to October 2010 (2%).

Planned purchasing (reflects November 2010 activity) for large ticket items points to new cars (1.4%) and used cars (2.9%) being off slightly from the prior month, but on par with last year. As the economy enters the holiday season, planned purchasing for homes (1.1%) in the next 30 days, reflecting November activity, is down compared to last month (3.0%), but unchanged from a year ago.

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.

Young, Wealthy Consumers Most Optimistic

The Consumer Reports Sentiment Index is currently at 46.6, up slightly from both 44.8 the prior month, and 42.2 a year ago. The most optimistic consumers are between age 18-34 (58.4, up from 54.3 the prior month), and with household incomes of $100,000 or more (55.1) The most pessimistic consumers are age 65 and older (38.4) and those with a household income less than $50,000 (42.2).


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.

American Economic Optimism Flat

Americans’ optimism about their standard of living is mostly flat compared with results in the past year, according to a new Gallup poll. Fifty percent of upper-income Americans saying their standard of living is “getting better” in October 2010, unchanged from the prior three months and a year ago. Similarly, 45% of lower- and middle-income Americans say their standard of living is getting better, also essentially the same as readings from the prior three months and October 2009.


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