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Release Date: 08/09/2011

Consumer Reports Index: Sentiment Plunges To Lowest Level Since December 2009

‘Dispirited’ Consumers Facing Difficulties with Jobs, Weak Finances

YONKERS, NY — August’s Consumer Reports Index, a measure of overall consumer sentiment, fell to its lowest level since December 2009 and registered its sharpest drop in two years, as recent events in Washington about the debt ceiling debate fixed attention on the weak economy.

“The debt ceiling debate in Washington focused the consumer’s attention fully on the dire state of the economy, leaving many in a dispirited mood,” said Ed Farrell, director of the Consumer Reports National Research Center.  “Americans are facing real financial difficulties due to weak employment, which is a key impediment to an economic recovery.  This is reflected in nearly every measure of the consumer’s experience.”

The Consumer Reports Index fell to 43.4, down sharply from 48.5 last month. The figure represents the percentage of people saying they were financially better off versus worse off than they were a year ago.  The Consumer Reports Trouble Tracker, a gauge of the breadth and depth of financial difficulties among American households, jumped 10 points to 60.6 in August, reflecting financial difficulties pertaining to health care and an inability to pay mortgages and other bills. The Employment Index fell to its lowest level since March 2010 and slid sharply, as more jobs were lost than created.

“The Consumer Reports Index shows no clear signs pointing to an economic recovery any time soon,” Farrell said.  “Too many households are feeling financial pain and more jobs were lost than created.  Unfortunately, the burden of this bad economy has fallen on the households that earn less than $50,000 a year.  They’re the ones having trouble finding new jobs, paying bills and affording health care.”

No region of the country was spared. The North Central States, South and Western regions showed the greatest rise in financial difficulties reflected by the Trouble Tracker Index, and the Employment Index was glum.

The retail indicators tracking recent and planned spending were the only measures to move in a positive direction in August, but they were rebounding from feeble levels in July. 

The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index: 43.4*

  • Consumer Reports Sentiment Index fell sharply from last month (48.5) and is below the 44.7 reported a year ago.
  • The most optimistic consumers: age 18-34 at 54.4, and households with income of $100K or more at 53.3. The most pessimistic consumers: households with income less than $50,000 (38.9) and those who are age 65 and older (32.8).  Each demographic group showed marked decreases in overall sentiment compared with July.

* 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 Reports Trouble Tracker Index: 60.6*

  • The Consumer Reports Trouble Tracker Index increased to 60.6, a 10-point jump from last month.  The most common factors behind the increase were the inability to afford health care, reduced health-care coverage, and missed bill payments.  The Trouble Tracker Index is higher than last August’s 56.6.
  • The financial difficulties that were on the rise in the past 30 days were led by the inability to afford medical bills or medications at 16.3%, an increase from 13.3% in July.
  • The number of people who reported missing a mortgage payment was 3.4%, up from 1.8% in July and 2.4% in August 2010. 
  • Lower-income households, earning less than $50,000 a year, have been disproportionately affected.  In the past 30 days: 25.2% were unable to afford medical bills or medications; 15.8% missed payment on a major bill (not a mortgage); 12.9% lost or had reduced health-care coverage; and 8.2% 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 Reports Retail Index: Past 30-Day 12.0, Next 30-Day – 9.3*

  • Consumer retail behavior rebounded slightly from July and represented one of the few bright spots in the Index. The Consumer Reports Past 30-Day Retail Index*, reflecting July activity, is 12.0, up from 10.2 the prior month.  The Consumer Reports Next 30-Day Retail Index*, reflecting planned purchasing in August, rose to 9.3 from 7.7 the prior month.
  • Looking in detail at the categories comprising the Consumer Reports Past 30-Day Retail Index, the month’s improvements from July to August stemmed from gains in small appliances (22.0% vs. 15.9%), major home electronics (13.3% vs. 10.1%) and personal electronics (22.8% vs. 20.6%).
  • Among the retail categories not included in the index, past 30-day purchases, reflecting July activity, were unchanged for new cars at 3.0%, used cars at 5.1% and home purchasing at 1.3%.  Purchasing over the next 30 days, reflecting planned August activity across these categories, is expected to show a slight increase for new cars and homes compared with the prior month.  Planned purchases for used cars in the next 30 days are slightly lower at 3.4% versus 3.8% 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.

Consumer Reports Employment Index: 49.0*

  • The Consumer Reports Employment Index fell to 49.0 from 50.8, a month ago.  The Employment Index fell to its lowest point since March 2010 and represents the biggest month-over-month decline since August 2009.  In the report, 5.1% said they started a new job in the past 30 days, compared with 7.2% that lost their job in the same period.
  • Households earning less than $50,000 had more than five times the proportion of job losses in the past 30 days compared with households earning more than $100,000 (11.4% vs. 2.1%). 

* The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job versus those that have lost their job or were laid off in the past 30 days. An index 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.

Consumer Reports Stress Index: 63.6*

  • The level of stress consumers rose to its highest level in 16 months and was up sharply from 59.4 in July.  Over the past year, the Consumer Reports Stress Index has ranged from a low of 55.4 in January 2011 to a previous high of 63.2 in October 2010. 

* 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).

For more information regarding the Consumer Reports Index, visit www.ConsumerReports.org.

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 (756 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between July 28 and 31. The margin of error is +/- 3.2 percentage points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields 914-378-2454. [email protected].

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