Consumer Sentiment Stagnates

July 12, 2011

consumer-reports-index-july-2011.JPGThe Consumer Sentiment Index of the Consumer Reports Index, which measures how consumers are feeling financially when compared with a year ago, rose slightly to 48.5 from the previous month’s score of 46.2, but continues to lag in negative territory. The July 2011 score is also comparable to the July 2010 score of 45.2.

Young, Wealthy Take Positive Outlook

The most optimistic consumers were those age 18-34 at 62.2, and households with income of $100,000 or more at 56.9. The most pessimistic consumers: households with income less than $50,000 (44.2) and those who are age 65 and older (38.7). In addition, Northeastern states had the most improved sentiment, but were still negative at 48.1.

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.

Consumer Troubles Up MOM, Down YOY

consumer-reports-trouble-july-2011.JPGThe Consumer Reports Trouble Tracker Index increased to 50.6 in July from 48.6 in June, affected by missed payments on major bills and loan denials as the most significant changes. The Trouble Tracker Index is still down substantially from last year’s 57.6.

The financial difficulties that were on the rise in the past 30 days were led by missed payments on major bills at 8.7%, an increase from 7.1% in June. The number of people who reported missing a mortgage payment was 1.8%, down from last month’s 2.7% and 2.4% a year ago.

Overall, the most prevalent consumer trouble remains the inability to afford medical bills or medications at 13.3%, down from 14.% last month. Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 21.4% unable to afford medical bills or medications; 16.0% missed payment on a major bill (not a mortgage); and, 9.3% lost or reduced health-care coverage.

Regionally, consumer financial troubles were up in the Southern (8.6%) and Central (5%) regions of the US, but down in the West (5.7%) and Northeast (5.4%).

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.

Consumers Display Weak Shopping

consumer-reports-highlights-july-2011.JPGConsumer retail behavior is weak. The Consumer Reports Past 30-Day Retail Index*, reflecting June activity, is 10.2, down from 12 the prior month. The Consumer Reports Next 30-Day Retail Index, reflecting planned purchasing in July, is also down, coming in at 7.7 compared to 9 the prior month.

Looking in detail at the categories comprising the Consumer Reports Past 30-Day Retail Index, the month’s softness was the result of declines in major and small appliances, down 2% from 9.4% to 7.7%, and down 25% from 21.1% to 15.9%, respectively.

Among the retail categories not included in the index, past 30-day purchases, reflecting June activity, were essentially flat for new cars (3% compared to 3.3%), while home purchasing was down slightly (1.9% compared to. 2.5%). Used car purchases increased slightly to 5.4% from 4.8%. Planned purchasing during the next 30 days, reflecting July activity across these categories, is projected by Consumer Reports to decrease for new and used cars and remain unchanged for purchases of homes compared to the prior month.

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.

About the Data: 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 1,006 interviews were completed (755 telephone and 251 cell phone) among adults aged 18 and older. Interviewing took place between June 23 and 26.

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