Consumers Stressed, Still Buy More

February 10, 2011

consumer-reports-index-feb-20111.JPGConsumers have a relatively flat financial outlook for the coming months as stress levels rise and financial difficulties increase, according to the Consumer Reports Index for February 2010. However, one bright spot is that retail spending for the previous and upcoming 30 days appear to be on the upswing.

Consumer Sentiment Holds Steady

The Consumer Sentiment Index, measuring consumers’ overall financial sentiment, held steady, standing at 48.7, its highest level in two years. The most optimistic consumers are those age 18-34 at 55.5 (down from 57.2 the prior month), and households with income of $100,000 or more at 61.5 (up from 57.4 a month earlier). The most pessimistic consumers are households with income less than $50,000 at 44.2 (up from 42.7 the prior month), and those age 65 and older at 41.9 (down from 44.1 a month earlier).

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.

Feb. ’11 Stress on Par with Last Year

consumer-reports-index-highlights-feb-2011.JPGThe Consumer Reports Stress Index indicates the level of stress consumers feel they are under is up to 59.3 from the prior month (55.4), but is on par with one year ago (59.9). The Consumer Reports Stress Index captures attitudes regarding the amount of stress consumers feel compared to a year ago. It asks whether they are feeling more stressed or less stressed. When the Stress Index is more than 50, consumers are feeling more stress and when it is below 50 they are feeling less stress compared to a year ago. The index can vary from 100 (total stress) to a low of 0 (no stress).

Financial Troubles on the Rise

Consumers faced more financial troubles this month than the month or year before. The index increased to 58.7 in February, up from January’s 54.2 as well as one year ago (53.4). Negative developments were led by an increase in consumers that were unable to afford medical bills or medications in the past 30 days to 17%, from 15.6% in January and 14.7% one year ago; and an increase in those that have lost or face reduced health-care coverage (9.3%), up from 8.6% last month and 7.5% the prior year.

Overall, the most prevalent consumer troubles include: Unable to afford medical bills or medications (17%); Missed payment on a major bill – not mortgage (9.7%); Lost or reduced health-care coverage (9.3%).

Northeast Sees Substantial Gain in Troubles

consumer-reports-trouble-tracker-feb-2011.JPGRegionally, the Northeast experienced a dramatic 20.2% increase in financial troubles this month, followed by the West (7.5%). The South had a slightly milder 5.7% jump, while the Midwest underwent a 1.8% dip in financial troubles this month.

Retail Recovery Resists Trouble

Retail continues its recovery, as the Consumer Reports Past 30-Day Retail Index (reflective of January 2011 activity) is 11.6, up from 10.9 last year. Similarly the Next 30-Day Retail Index, reflecting planned purchasing for February 2011, is 8.3, up from 6.9 one year ago.

Looking in detail at the categories comprising the Past 30-Day Retail Index (major appliances, small appliances, major home electronics, personal electronics, major yard/garden equipment), gains are attributable to several categories, including major appliances (7.1%, up from 6.3% a year ago), major home electronics (15.%, up from 13.9% last year), and personal electronics (25.5%, up from 23.6% last year).

The Consumer Reports Next 30-Day Retail Index is led by personal electronics (17.5%, up from 13.2%) and major home electronics (9.8%, up from 6.8%). Planned purchasing for personal electronics is anticipated to be up in February compared to the prior month as well (15.9%).

Among the non-index categories (new car, used car, home), past 30-day purchasing, reflecting January 2011 activity, was soft versus one year ago. Past 30-day purchasing for new cars was 1.8%, for used cars 4.3%, and 1.9% for homes. Planned purchasing in February reflects increasing confidence among consumers, with small gains from one year ago for new cars 3.0%, up from 2.7%; used cars 5.1%, up from 3.7%; homes 2.2%, up from 1.7%.

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.

Gallup: Economic Optimism Ties 3-Yr High

Forty-one percent of Americans in January 2011 said the economy is “getting better,” up 17% from 35% in December 2010 and about 8% from 38% a year ago, according to results of a recent Gallup Poll. This level of optimism ties for the highest since Gallup daily tracking began in January 2008.


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