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Consumer Reports Index: Conditions Improve Unevenly With Sentiment Strengthening While Spending and Employment Weaken

February 7, 2012

Financial burdens plague those earning less than $50,000/year

YONKERS, N.Y., Feb. 7, 2012 /PRNewswire-USNewswire/ — February’s Consumer Reports Index, a measure of overall consumer financial health, showed that conditions improved, but gains were uneven. Consumer Sentiment is up; however, employment wavered and retail activity was lackluster in what is usually a light shopping month. Financial difficulties fell disproportionately on those in households making less than $50,000, who make up about half of all adults.

The Consumer Reports Employment Index slipped back into negative territory (49.5) after inching above 50 in January (50.6), with past 30-day job losses (5.7%) outpacing job gains (4.7%). Some of this is likely associated with the loss of positions created for the holiday season.

January’s drop in retail was led by weak sales in personal electronics, major home electronics and small appliances. The Past 30-Day Retail Index for February, reflecting January activity, was 11.8 down from 15.0 in December and unchanged from January 2011. The Next 30-Day Retail Index, reflecting planned spending for February, was down to 7.1 compared to 7.9 in January.

“Despite improving jobs data released by the government Friday, employment concerns weigh heavily on consumers,” said Ed Farrell, director of the Consumer Reports National Research Center. “This uncertainty surrounding employment is likely suppressing retail activity, further exacerbating the problem.”

February’s Consumer Reports Sentiment Index, which measures how consumers are doing financially versus a year ago, rose to 49.6, up from January at 48.2. The most optimistic consumers were ages 18 to 34, and households earning $50,000-$99,999. The most pessimistic consumers were those in households earning less than $50,000 and people ages 65 and older.

The Consumer Reports Trouble Tracker Index addresses both the proportion of consumers that have faced difficulties, as well as the number of hurdles they have encountered. This index improved by falling slightly to 49.1 after registering at 50.4 in January and is substantially better than a year ago (58.7). However, the impact of financial difficulties is very different across households. The Trouble Tracker for those living in households with income less than $50,000 stands at 69.4, more than two times as great as those in households earning $100,000 or more (28.1).

With the passing of the holidays, the level of stress that consumers felt was down this month and is at its lowest level since it was first measured in April 2009. The Stress Index at 55.3 was down slightly from 56.0 the prior month.

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: 49.6*

  • Consumer Reports Sentiment Index for February (49.6) was up from last month (48.2) and is at its highest level since March 2011 (50.3), when it was briefly in positive territory, as indicated by a score over 50.
  • Respondents age 18-34 and in households with income of $50,000-$99,999 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 up (62.1) from January (55.2).
    • Households with income of $50-99K (53.8) were unchanged from the prior month (53.3).
    • Households with income less than $50,000 (46.1) rose from 42.9 the prior month.
    • Those who are age 65 and older (43.1) were up from 40.9 in January.

* 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: 49.1*

  • The Consumer Reports Trouble Tracker Index at 49.1 was essentially unchanged from 50.4 the prior month, but is much improved from one year ago (58.7). The impact of financial difficulties is very different across households. The Trouble Tracker Index for those living in households earning less than $50,000, about half of all adults, stands at 69.4, more than two times as great as those in households earning $100,000 or more (28.1).
  • Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 23.4% were unable to afford medical bills or medications; 8.7% 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 – 11.8, Next 30-Day – 7.1*

  • After the holiday season, consumers appear to be cutting down on spending, resulting in a decrease in retail activity over the past 30 days, while projected spending over the next 30 days is also down. The Consumer Reports Past 30-Day Retail Index*, reflecting January activity, was 11.8, down from 15.0 the prior month and unchanged compared to last year. The Consumer Reports Next 30-Day Retail Index*, reflecting planned purchasing in February, decreased as well.
  • Delving deeper into the Consumer Reports Past 30-Day Retail Index, January’s drop-off in spending was driven by a big decline in personal electronics (29.2% vs. 35.8%), major home electronics (14.3% vs. 19.7%) and small appliances (19.6% vs. 26.3%).
  • For the second straight month, the Consumer Reports Next 30-Day Retail Index declined. At 7.1, it is down from the month prior, as well as down from a year ago.
  • Among non-index categories, past 30-day purchases, reflecting January activity, were flat versus last month for new cars at 2.3%, and used cars at 4.3%, but down for homes (1.3% versus 2.4% in December).
  • Purchasing over the next 30 days, reflecting planned February activity, was up substantially for used cars (7.0% vs. 3.3%), but even for new cars (1.5% vs. 1.8%), and up for homes (2.0% vs. 1.1%).

* 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: 49.5*

  • The Consumer Reports Employment Index slipped back into negative territory this month to 49.5, from 50.6 in January, with past 30-day job losses (5.7%) outpacing job gains (4.7%).
  • The Employment Index changed little in the North East and North Central regions, but worsened in the South and West.

* 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: 55.3*

  • The level of stress that consumers feel continued to decline, and in February slipped further to its lowest level since first measured in April 2009. This month’s Stress Index dropped to 55.3 from 56.0 in January. Those feeling the most stress were aged 35-64 years of age (59.6), those in households earning less than $50,000 (57.2), and those living in the North East (59.6).

* 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 1,034 interviews were completed (784 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between January 26 and January 29. 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.

FEBRUARY 2012
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