US consumer spending behavior showed some signs of improvement in July 2010, according to the new Consumer Reports Index.
Retail Spending Grows in July
The Consumer Reports Past 30-Day Retail Index for August 2010, reflective of July 2010 activity, is at 11.4, up from 10.4 in July 2010 and 9.5 in August 2009. Per capita spending for the index categories in the past 30 days was up slightly for August, reflecting July activity, to $286, from July’s $274, capping three straight months of steady growth. The proportion of Americans buying across categories in the past 30 days showed that the largest gains were posted by personal electronics (24.9%, up from 22.5%); small appliances (20.3%, up from 17.4%); and major home electronics (12.7%, up from 10.8%).
The Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for August 2010, is at 8.1, slightly down from 8.5 the prior two months, but an improvement from 7.5 in August 2009.
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 Dips Slightly
From April – July 2010, the Consumer Reports Sentiment Index crept upwards, rising from 43.7 in April to 45.2 in July. Sentiment is slightly down to 44.7 in August. For the second straight month, the most optimistic consumers are between the ages of 18-34 (53.2) along with households with an income of $100,000 or more (53.8). The most pessimistic consumers are between the ages of 35-64 (43.3) and 65 and older (35) and households with an income less than $50,000 (40.2).
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.
Consumers Report Fewer Troubles
One area of continued improvement was the Trouble Tracker Index, which measures consumer financial difficulties and negative events. Overall, the Consumer Reports Trouble Tracker Index has shown a decline for the second straight month, pointing to fewer troubles for consumers, dropping to 56.6 in August from 57.6 in July and 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.
Specific improvements during the past 30 days were small. There were some positive developments, led by a decline in consumers missing mortgage payments to 2.4% from the recent high of 3.9% in June 2010, as well as a drop in the proportion of Americans’ homes entering foreclosure (0.6%) following two months of increases.
On the downside, in the past 30 days, 9.7% of consumers reported losing or facing reduced healthcare coverage, up from the prior month (8.9%), and at its highest level recorded since April 2009.
The most common difficulties faced by Americans are:
- Unable to afford medical bills or medications (15.4%), down from 16% in July.
- Missed payment on a major bill – not mortgage (10.2%), even with July.
- Lost or reduced healthcare coverage (9.7%), up from 8.9% in July.
- 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%).
Troubles Rise Dramatically in Northeast
Regionally, consumers in the Northeast experienced a dramatic increase in difficulty in August, with a 16.9-point Trouble Tracker Index increase. Consumers in the West also saw more difficulties, with a 9.6-point increase. However, difficulties dramatically declined in the South, which experienced a 16.9-point drop in its Trouble Tracker Index score. Combined with a much more modest 0.5-point drop in the North, this produced the overall one-point decrease in the national Trouble Tracker Index.
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:
- 27% have been unable to afford medical bills or medications, up from 22.9% in July.
- 15.2 % lost or have reduced healthcare coverage, up from 12.5% in July.
- 17.5% missed payment on a major bill – not mortgage, up from 15.3% in July.
Back-to-School Spending Looks Solid
The average American family will spend $550 on back-to-school items this year, according to the August 2010 American Express Spending & Saving Tracker.
A majority (80%) of consumers with children in preschool through high school expect to spend more (39%) or the same (41%) per child on back to school shopping this year compared to last year. Virtually all parents (94%) say they will look for ways to be resourceful and to stretch their dollars, primarily by shopping for clearance or sale merchandise (76%) and clipping coupons and/or watching for store promotions (63%).
About the Data: A total of 1,259 interviews were completed (1,009 telephone & 250 cell phones) among adults aged 18 and older. Interviewing took place between July 29 and August 1, 2010.
