Consumer Troubles Grow

December 14, 2010

An increase in financial troubles reported by US consumers may negatively affect spending this month, according to the December 2010 Consumer Reports Index.

Consumer Troubles Climb

Consumers faced more troubles in December 2010 than the previous month, signaling a halt to five months of improvement. The trouble tracker index increased to 52.7 in December, up from November’s 49.3, though the Trouble Tracker Index is much improved from its score one year ago (62).Negative developments were led by an increase in consumers that lost their job in the past 30 days to 7.4% from 4.9% in November, and an increase in those that have missed a payment on a major bill (not mortgage) to 9.5% from 8.9% a month earlier.

A sign of the weak jobs market is the proportion of consumers that have lost or face reduced health-care coverage (9%), up slightly from last month (8.7%), but up more substantially from a year ago (7.9%).

On the positive side, there were fewer consumers that could not afford medical bills or medications (13.3%) compared to last month (14.5%) and one year ago (15.7%). However, the improvement in the proportion that could not afford medical bills or medication may signal a change in behavior, where consumers are availing themselves of medical services less often.

Overall, the most prevalent consumer troubles include: the inability to afford medical bills or medications (13.3%) missed payment on a major bill – not a mortgage (9.5%), and lost or reduced health-care coverage (9%).

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 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.

The West is the Best

cr-trouble-tracker-dec-2010.JPGRegionally speaking, the West was the one part of the US where financial troubles actually declined in December 2010, by a fractional 0.1%. This was still much better than the increases seen in other regions of the US, led by the South with 4.7%.

Planned Purchases Slightly Trail ’09

cr-natl-highlights-dec-2010.JPGThe Past 30-Day Retail Index for December (reflective of November activity) is 12.4, up from the prior month (10.9), as well as a year ago (11.2). December’s Next 30-Day Retail Index (planned purchases for December), is at 11.8, up substantially from last month (8), but is slightly trailing last year at this time (12.2).

Looking in detail at the categories comprising the Past 30-Day Retail Index gains were attributable to an uptick in small appliance sales versus the prior month (21.8% compared to 16.7%, respectively); gains in home electronics, up to 15% from 11.8% a month earlier; and personal electronics (26.2%), up substantially from the prior month (19.6%). Compared to one year ago, sales in the past 30-days were up for home electronics (15 %) as opposed to 11.9% last year; and for major appliances (8.1%), up from 6.8% a year ago.

The gain in the Next 30-Day Retail Index for December 2010, reflective of December activity, was attributable to an increase in planned purchasing of personal electronics (27.8%), up from 18.2% a month earlier; and a gain in planned purchasing for home electronics (16.5%) compared to the prior month (10%). Compared to last year, however, planned purchasing of personal electronics was down for this December, 27.8% as opposed to 32.9%, respectively.

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.

Youth, Wealth Equal Optimism

cr-index-dec-2010.JPGThe Consumer Reports Sentiment Index (45.1) has slipped slightly from the prior month (46.6), but is up slightly from one year ago (41.8). Sentiment has not entered positive territory (more than 50) since it was first measured by the Consumer Reports Index on October 5, 2008 and stood at 45.3.

The most optimistic consumers are age 18-34 – 53.5, (down from 58.4 the prior month) and those with household incomes $100,000 or more – 54.5, about even with the prior month (55.1).

The most pessimistic consumers are households with income less than $50,000 (40.2, down slightly from the prior month at 42.2), and consumers age 65 and older (38.7, little changed from a month earlier at 38.4).

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.

100% of Women Plan to Holiday Shop

One hundred percent of women surveyed plan to shop for the holidays this year, compared to 88% of men, according to the American Express Spending & Saving Tracker. Gift cards remain the most popular item consumers will give this holiday season (53%).


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