US Consumers Tighten Purse Strings

February 10, 2010

This article is included in these additional categories:

Analytics, Automated & MarTech | Retail & E-Commerce | Staffing

Following a financially optimistic January 2010, US consumers are tightening their purse strings this month, according to the Consumer Reports Index.

Spending Trends Downward

The Past 30-Day Retail Index for February 2010, which reflects the purchases consumers made in January 2010, is 10.9, a decline of 23% from 14.1 in January 2010. And consumers are planning to spend even less this month. The Next 30-Day Retail Index, which represents the number of electronics, appliances, and yard and garden equipment consumers said they’re planning to buy this month, plummeted to 6.9 from 8.9 the prior month. That’s the lowest level it has been since August 2009.

The January 2010 American Express Spending & Saving Tracker also indicates consumers are increasingly reluctant to spend money. According to the Tracker, 89% of the general population has set a clear financial goal for the year and 83% has a specific savings strategy in place, with a goal of saving on average $14,000 this year and $1,200 in the next 30 days.

Financial Sentiments Stay the Same

Despite reduced willingness to spend money, consumers are about as financially optimistic this month as they were last month. The Consumer Sentiment Index, which measures financial optimism, slightly declined from 44.1 in January 2010 to 43.9 in February 2010.

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After declining from June-September 2009, and hitting a near-historic low of 38.1 in September, the Consumer Sentiment Index hit adjusted scores of 42.1 in October and 42.2 in November. For December, the Index showed incremental decline with a score of 41.8. The Index, which indicates financial optimism when it surpasses 50, reached a high of 48.5 in June 2009 and had been increasing on a monthly basis since hitting a low point of 37.8 in October 2008.

Stress Stays Level, Too

Not surprisingly, the passing of the end-of-year holidays has resulted in lower consumer stress levels. The January 2010 Stress Index dropped from 63 in December 2009 to 59, and edged up to 59.9 in February 2010. The index can vary from 100 (total stress) to a low of 0 (no stress). In September, the Stress hit an all-time high of 65.7, but dropped to an adjusted score of 62.3 in October and 60.5 in November, ending a steady upward progression since declining from 63.8 in April 2009 to 57 in June 2009.

Troubles Decline Dramatically

Consumers’ decreased willingness to spend money does not appear tied to personal financial hardships. The Trouble Tracker Index, which focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered, has been notably improving since hitting its highest reading ever in September 2009, 68.7. This month, it fell from 58.2 in January 2010 to 53.4. While this is a positive sign, it is worth noting that the Trouble Tracker is still well above its low point of 48.5, reached in May 2009.

The negative events followed by the Trouble Tracker include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest rate increase, penalties 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.

This month, the key difficulty faced by consumers was the inability to afford medical bills or medication (14.7%). The Consumer Reports Trouble Tracker Index is 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.

Employment Index Also Stays Flat

The Employment Index, which examines the change in employment of those that reported starting a new job, compared to those that have lost their job or were laid off in the past 30 days, remained steady at 49.3 in February 2010. In the past 30 days, 5.7% of Americans reported losing their job versus 3.8% who claimed to start a new job.

The official January 2010 Employment Situation Summary roughly corroborates the findings of the Employment Index. According to the Bureau of Labor Statistics, the U.S. unemployment rate fell from 10% to 9.7%, with the economy shedding 20,000 non-farm payroll jobs.

An Employment Index score below 50 indicates more jobs were lost than gained, while a score more than 50 indicates more jobs were gained than lost in the past 30 days.

About the Survey:The Consumer Reports Index, conducted by the Consumer Reports National Research Center, is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,263 interviews were completed (1,013 households, 250 cell phones) among adults aged 18 and older between January 28-31, 2010.

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