Consumer Reports Index: Consumer Sentiment Drops After Three Straight Months of Improvement

March 7, 2012 |

Americans show little interest in spending more on retail items since holidays

Yonkers, NY – March’s Consumer Reports Index, a measure of overall consumer financial health, showed that the confidence of the American consumer is waning, with a drop in overall signs of mounting financial difficulty emerging.

After three months of improvement, the Consumer Reports Sentiment Index fell this month to 46.1, from 49.6 last month. Further challenging consumer confidence, The Trouble Tracker Index increased slightly this month to 52.2 from 49.1 in February, and is now at its highest level since August 2011.

The impact of financial troubles is very different across income levels. The Trouble Tracker Index for those living in households earning less than $50,000, about half of all American adults, stands at 73.9, nearly four times as great as those in households earning $100,000 or more (18.9).

Since the holidays, retail has yet to regain its footing with Americans continuing to pull back on spending. Consumer Reports Past 30-Day Retail Index fell slightly to 11.5 from 11.8 last month, a pattern similar to last year. Planned purchasing over the next 30 days, reflecting anticipated March activity, is 8.7, up from 7.1 the prior month, seeding hopes for an upturn in the near term.

“Consumers are not yet comfortable in their financial situation as the country limps into its fifth year of near-recessionary times,” said Ed Farrell, director of the Consumer Reports National Research Center. “Weak retail is the symptom, not an underlying cause. Consumers will need a clear signal led by a greatly improved jobs outlook to resume spending.”

The Consumer Reports Employment Index this month (49.9) is once again approaching positive territory, but is little changed from February (49.5). In the past 30 days, roughly the same proportion of Americans reported starting a new job (5.8%) as losing a job (6.0%).

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: 46.1*

• Consumer Reports Sentiment Index for February (46.1) was down from last month (49.6), sinking further into negative territory.
• Respondents age 18-34 and in households with income of $100,000 or more were the most optimistic consumers, while the most pessimistic consumers were in households with income less than $50,000 and respondents age 65 and older.
  • Ages 18-34 were down (54.4) from February (62.1).
  • Households with income less than $50,000 (41.7) were down from 46.1 the prior month.
  • Those who are age 65 and older (39.1) were down from 43.1 in February.

Consumer Reports Trouble Tracker Index: 52.2*

• The Consumer Reports Trouble Tracker Index at 52.2 was worse than the 49.1 the prior month and one year ago (44.8).
• Overall the most prevalent troubles Americans continue to face are the inability to afford medical bills (14.9 %), missing a payment on a major bill—not mortgage (9.3 %), and the loss or reduction of their health-care coverage (9.3 %).
• Lower-income American households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 22.7% were unable to afford medical bills or medications; 13.7% missed payment on a major bill (not a mortgage); and 9.6% lost or had 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.

Consumer Reports Retail Index: Past 30-Day – 11.5, Next 30-Day – 8.7*

• 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), losses were driven by a decline in personal electronics (24.4% down from 29.2% a month earlier).
• Gains in the Consumer Reports Next 30-Day Retail Index for March, reflecting March activity, were driven primarily by an increase in planned purchasing of major appliances (6.3% versus 5.1% the prior month), and major home electronics (11.1% versus 9.6% a month earlier).
• Among the retail categories tracked but not included in the index, past 30-day purchases, reflecting February activity, were up slightly for new cars (3.1%) versus last month (2.3%), and flat for used cars (4.6%) and homes (1.7%).

Consumer Reports Employment Index: 49.9*

• The Consumer Reports Employment Index remained virtually unchanged this month from February and holding steady in negative territory. Job gains in the past 30-days (5.8%) were roughly equivalent to losses (6.0%).

* 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: 57.5*

• The level of stress that consumers feel rose to 57.5 in March from the previous month (55.3). Those feeling the most stress were aged 35-64 years of age (58.4), those in households earning less than $50,000 (60.1), and those living in the North East (66.0).

* 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.

About The Consumer Reports Index

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 1,032 interviews were completed (782 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between February 23 and February 26. 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 or cfields@consumer.org.

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