The September 2011 Consumer Reports Index, a measure of overall consumer financial health, showed signs that sentiment is improving after plummeting to its lowest level in nearly two years last month. The Consumer Reports Sentiment Index rose to 48.8, up from 43.4 in August 2011 and 44.1 in September 2010.
The most optimistic consumers were age 18-34 at 56.4, and households with income of $100,000 or more at 56.1. The most pessimistic consumers were households with income less than $50,000 (44.5), and those who are age 65 and older (40.1). Each demographic group showed noticeable increases in overall sentiment compared with August.
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 Drop Sharply
The Consumer Reports Trouble Tracker Index decreased to 45.3, a significant 15.3-point drop from 60.6 last month. This improvement in the Trouble Tracker Index is the largest single month-to-month swing recorded since tracking began in April 2009. Improvements in the index were led by decreases in several components: inability to afford medical bills or medications; lost or have reduced health-care coverage; missed major non-mortgage bill payments; and, increased interest rates/penalty fees/etc. on credit cards. The Trouble Tracker Index is also much lower than last September’s 53.7.
Troubles especially declined in the West, with a 27.3-point decline from the prior month, followed by drops in the South (21.1 points) and North Central (13.5 points) regions. Troubles moderately increased by an index score of 4.3 points in the Northeast.
The financial difficulties that were on the decline in the past 30 days were led by the inability to afford medical bills or medications at 13%, a decrease from 16.3% in August. The number of people who reported missing a mortgage payment was 2.7%, down from 3.4% in August but slightly up from 2.4% in September 2010. Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 22% were unable to afford medical bills or medications; 12.3% missed payment on a major bill (not a mortgage); 7.8% lost or had reduced health-care coverage; and, 5.9% had negative changes to credit-card terms.
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.
Consumer Retail Behavior Slightly Worsens
Consumer retail behavior dropped slightly from August, which is a contrast to the improvements in the Trouble Tracker Index. The Consumer Reports Past 30-Day Retail Index, reflecting August activity, is 10, down from 12 the prior month. The Consumer Reports Next 30-Day Retail Index, reflecting planned purchasing in September, dropped to 8.4 from 9.3 the prior month.
Taking a closer look at the categories comprising the Consumer Reports Past 30-Day Retail Index, the month’s decline from August to September stemmed from losses in major appliances (5.8% compared to 9%), major home electronics (11.6% compared to 13.3%), and personal electronics (21.4% compared to 22.8%).
Among the retail categories not included in the index, past 30-day purchases, reflecting August activity, increased for new cars at 4.5%, up from 3%, used cars at 6%, up from 5.1%, and home purchasing at 2.1%, up from 1.3%. Purchasing during the next 30 days, reflecting planned September activity across these categories, is expected to be steady for new cars and used cars compared with the prior month. Planned purchasing for homes in the next 30 days is expected to drop to 0.7% versus 2.7% 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.
Gallup: Consumer Spending Dips in August
Overall self-reported daily US consumer spending in stores, restaurants, gas stations, and online averaged $68 per day in August 2011, down 8% from $74 in July 2011, according to Gallup data. Spending has now returned to May and June 2011 levels, but remains 8% above the $63 average from August 2010. The highest spending recorded so far in 2011 is July. The low point of average daily spending in 2011 so far is $58 in January, meaning the August figure beats the year-low by 17%.
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 1,036 interviews were completed (786 telephone and 250 cell phone) among adults aged 18 and older. Interviewing took place between August 25 and 27.