US consumers are apparently becoming more upbeat about the economy, as the Consumer Reports Index in April 2011 remained positive for the second consecutive month. Consumer Reports analysis indicates index results point to an improving employment climate, higher consumer spending, and a reduction in overall household financial stress for the American consumer.
Overall Financial Sentiment Stays Positive
The Consumer Reports Sentiment Index was at 50.2 in April 2011, which is close to last month’s 50.3, when the index was in positive territory for the first time since it was launched in 2008 and is up substantially from a year ago (43.7). The most optimistic consumers were those age 18-34 at 61.2 (up from 57.4 the prior month), and households with annual income of $100,000 or more at 60.7 (an increase from 59.9 a month earlier).
Meanwhile, the most pessimistic consumers were households with annual income less than $50,000 at 42.4 (down slightly from 43.2 the prior month), and those age 65 and older at 40.5 (a decrease from 42.6 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.
Troubles Decline Dramatically from Feb.
The Consumer Reports Trouble Tracker Index, which measures the breadth and depth of financial difficulties faced by US households, improved to 44.5 from 44.8 last month. The Trouble Tracker Index has improved significantly from February’s 58.7. The Trouble Tracker Index is now at its lowest level for the second consecutive month since it was first released in April 2008.
Declines were evident for a wide range of reported financial difficulties in the past 30 days. The sharpest declines compared to the prior month included: missed payment on a major bill, not mortgage (6.2%), down 25% from 8.3%; negative changes to credit card terms such as increased rate, penalty fees, etc. (5.1%), down 25% from 6.8%; and missed mortgage payment (1.9%), down 49% from 3.7%.
However, the proportion of consumers unable to afford medical bills or medications increased a substantial 34.5% since the prior month, rising from 11.4% to 15.3%.
Consumer Reports advises lower-income household earning less than $50,000 a year have been disproportionately affected. In the past 30 days, with 24.3% unable to afford medical bills or medications; 7.5% missing payment on a major bill (not a mortgage); and 8.1% experiencing lost or reduced health-care coverage.
The Consumer Reports Trouble Tracker Index 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.
Midwest Sees More Trouble
Dividing the US into four major regions, the Midwest experienced the sharpest increase in financial troubles in April 2010, with incidences rising 8.3% compared to the prior month. The Southeast followed with a 3% increase. Incidences of financial troubles fell month-over-month in the Northeast (-9.2%) and West (-7.1%).
All four regions experienced dramatic month-over-month decreases in financial troubles in March 2011. Although it experienced a large upswing this month, the Midwest had a substantially larger drop in its incidence of financial troubles (down 21.6%) than other regions of the US. The Southeast had the next best performance (down 12.5%), with the West (11.6%) and Northeast (11.5%) following.
Past/Future Spending Rises
The Consumer Reports Past 30-Day Retail Index for April 2011, reflecting March 2011 activity, is 12.6, up significantly from both the prior month (10.5) and a year ago (10.4). The Next 30-Day Retail Index, reflecting planned purchasing in this month, is also up, standing at 9.4 compared to 7.6 the prior month and 8.3 a 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), the only category that fell month-over-month was small appliances. All categories were higher than a year ago.
Among the non-index categories (new car, used car, home), past 30-day purchases, reflecting March activity, are higher than a year ago for both new cars (3 compared to 2.3%) and used cars (5.3% compared to 4.6%), and for home purchases (2.1% compared to 1.4%). Planned purchasing in April 2011 compared to a year ago is flat for used cars (4.3% compared to 4.2%) and down for new cars (1.1 % compared to 2.1 %) and homes (1.1% compared to 1.5%), compared with the year ago period.
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.
