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Consumer Reports Index: Sentiment Shows Improvement, While Jobs Are Still a Concern

September 6, 2011

Weak Employment Continues To Impede Economic Recovery

YONKERS, N.Y., Sept. 6, 2011 /PRNewswire-USNewswire/ — September’s 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. With the poor job market, recovery is a grueling process.

“Weak employment growth is the number one issue facing Americans,” said Ed Farrell, director of the Consumer Reports National Research Center. “Continued improvement in Sentiment and sustained declines in financial difficulties faced by consumers, hinges on getting American’s back to work.”

  • The Consumer Reports Sentiment Index rose to 48.8, up from 43.4 in August. 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, dropped 15.3 points to 45.3 in September, reflecting a drop in financial difficulties including inability to pay for health care, missed mortgage payments and falling behind on other bills. Employment remains weak. The Employment Index was virtually unchanged from last month, reflecting an economy shedding more jobs than it is creating. The underlying problem is anemic job creation. This month, the number of Americans who started a new job in the past 30 days was at its lowest level since March 2010.

“The Consumer Reports Trouble Tracker showed a large swing in the right direction, but that’s just a snapshot of the big picture,” Farrell added. “At this time, we are in an economy that is shedding more jobs than it is creating. Households that earn less than $50,000 a year, which represent nearly half of the population, continue having trouble finding new jobs, paying bills and affording health care.”

While the North East states saw a rise in financial difficulties, the North Central, South and Western regions showed a large decline in financial difficulties reflected by the Trouble Tracker Index.

The retail indicators tracking recent and planned spending declined after moving in a positive direction in August. The Past 30-Day Retail Index* registered a 10-month low.

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: 48.8*

  • Consumer Reports Sentiment Index is up from last month (43.4) and above the 44.1 reported a year ago.
  • The most optimistic consumers: age 18-34 at 56.4, and households with income of $100K or more at 56.1. The most pessimistic consumers: 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 Reports Trouble Tracker Index: 45.3*

  • The Consumer Reports Trouble Tracker Index decreased to 45.3, a 15.3-point drop from 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 lower than last September’s 53.7.
  • 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 13.0%, 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 and 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: 22.0% 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 Reports Retail Index: Past 30-Day 10.0, Next 30-Day 8.4*

  • 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 10.0, down from 12.0 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% vs. 9.0%), major home electronics (11.6% vs. 13.3%), and personal electronics (21.4% vs. 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 3.0%, used cars at 6.0%, up from 5.1%, and home purchasing at 2.1%, up from 1.3%. Purchasing over 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.

Consumer Reports Employment Index: 49.4*

  • The Consumer Reports Employment Index rose slightly to 49.4 from 49.0 a month ago. The increase in the Employment Index is a slight rebound after suffering the biggest month-over-month decline since August 2009. In the report, 3.8% said they started a new job in the past 30 days, compared with 4.9% that lost their job in the same period.
  • Households earning less than $50,000 had three times the proportion of job losses in the past 30 days compared with households earning more than $100,000 (8.5% vs. 2.5%).

* 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: 60.2*

  • The level of stress consumers feel declined to 60.2 from 63.6 in August, when the index rose to its highest level in 16 months.

* 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 1,036 interviews were completed (786 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between August 25 and 27. 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 cfields@consumer.org.

SEPTEMBER 2011
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