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Consumer Reports Index Finds the Economy Making Slow Advancements in a Stalwart Recession

Employment Index Shows Highest Growth Since April 2009

Consumer ReportsYonkers, NY  — After a brief retreat in June, the economy is showing broad improvements in the condition, behavior and expectations of consumers, according to Consumer Reports Index for July.

The Consumer Reports Employment Index numbers show job creation increased to 51.1, its highest level since April 2009. The Employment Index has pointed to employment growth in three of the last four months. In July, 7.8% of Americans started a new job versus 5.7% that lost their job.

Consumer spending across index categories rose in July, particularly in the area of personal electronics and major home appliances. Per capita retail spending was up slightly for July ($274.00), reflecting June activity, from the prior month ($234.00).

The Consumer Reports Trouble Tracker Index, which measures the financial difficulties faced by consumers in the past 30 days, declined to 57.6 from 63.5 the prior month, and is slightly below July of last year (58.8). The most notable improvement was in the proportion of Americans that missed a mortgage payment, down to 2.4% from 3.9% the prior month.

Though showing improvement, dogged problems remain, including the proportion of Americans that were unable to afford medical bills or medications (16.0%), or lost or have reduced health-care coverage (8.9%). Problems in affording healthcare are well above levels seen in 2009. A worrisome development in the Consumer Reports Trouble Tracker Index is a rise in Americans’ homes going into foreclosure in the past 30 days. Foreclosures were reported by 1.3% of consumers in June, capping three straight months of increases.

Over the past four months, the Consumer Sentiment Index has crept upwards at a glacial pace, rising from 43.7 in April to 45.2 in July. Despite advances in employment and declining consumer difficulties, Consumer Sentiment stands at 45.2, virtually unchanged from June (45.0).

“The climb out of this recession remains slow with frequent setbacks and unlike most recoveries, where the climb out is roughly linear, we are seeing many ups and downs as consumers once again try to regain their footing,” said Ed Farrell, a director of the Consumer Reports National Research Center. “A true bright spot for July is that Americans are heading back to work, with the employment index climbing into positive territory and gains posted in three of the last four months.”

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: 45.2

  • Over the past four months, the Consumer Reports Sentiment Index has crept upwards, rising from 43.7 in April to 45.2 in July. Sentiment is virtually unchanged from the prior month (45.0) and up slightly from a year ago (43.2). The most optimistic consumers are between the ages of 18-34 years old (56.6), and with a household income $100,000+ (50.6). The most pessimistic are households with an income less than $50,000 (42.6), and Americans 65 or older (38.2).

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: 57.6

  • The Consumer Reports Trouble Tracker Index has shown a decline this month, pointing to fewer troubles for consumers, dropping to 57.6 in July from 63.5 in June. The most notable improvement was in the proportion of Americans that missed a mortgage payment, down to 2.4% from 3.9% the prior month.
  • Problems still ensue including the proportion of Americans that were unable to afford medical bills or medications (16.0%) or lost or have reduced health-care coverage (8.9%) remain. Problems in affording healthcare are well above levels seen in 2009. There is also a rise in Americans’ homes going into foreclosure in the past 30 days. Foreclosures were reported by 1.3% of consumers in June, capping three straight months of increases.
  • The most common difficulties faced by Americans are:
  • Unable to afford medical bills or medications (16.0%), down from 16.4% in June
  • Missed payment on a major bill – not mortgage (10.0%), up from 9.4% in June
  • Lost or reduced healthcare coverage (8.9%), down from 9.3% in June
  • Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:
  • 22.9% Have been unable to afford medical bills or medications
  • 12.5% Lost or have reduced healthcare coverage
  • 15.3% Missed payment on a major bill – not mortgage
  • One consumer difficulty has steadily diminished over the past several months. Reported negative changes to credit card terms has fallen to 8.1% in July from 9.5% in June, and is well below its high point of September 2009 (16.1%).

The Consumer Reports Trouble Tracker 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 healthcare 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 – 10.4, Next 30-Day – 8.5

  • Consumer Reports Past 30-Day Retail Index for July, reflective of June activity, is at 10.4, unchanged from 10.8 in May. Per capita spending for the index categories in the past 30 days was up slightly for July, reflecting June activity, to $274.00, from June’s $234.00. Though volume of purchasing is down, the value of purchases rose in July, particularly in the area of personal electronics and major home appliances.
  • Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for June, is at 8.5, even with the prior month (8.5).
  • Looking in detail at the categories comprising the Retail Index (major appliances, small appliances, major home electronics, personal electronics, major yard/garden equipment), most categories were down slightly from the prior month. Small appliances registered a small gain in July (17.4%) versus June (15.0%) in the proportion of Americans buying in the past 30 days.
  • Among the non-index categories, past 30-day purchases, reflecting June activity, were down for new cars (1.7%) and used cars (4.8%) from the prior month, 3.2% and 5.8%, respectively. Home purchases were also down in July (2.3%) relative to June (3.1%), halting three straight months of increases.

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 Stress Index: 61.0

  • According to the Consumer Reports Stress Index, the level of stress consumers feel they are under (61.0) is up slightly compared to the prior month (57.6), as well as from one year ago (58.4).

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).

Consumer Reports Employment Index: 51.1

  • Job creation increased to its highest level in July (7.8), adding to three months of improved hiring. Consequently, the Consumer Reports Employment Index is now back in positive territory for July (51.1), its highest reading since April 2009.
  • The Employment Index has pointed to employment growth in three of the last four months. In July, 7.8% of Americans started a new job versus 5.7% losing their job.

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.

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 1,258 interviews were completed (1,007 telephone & 251 cell phones) among adults aged 18+. Interviewing took place between June 24 – June 27, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available.

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