Americans faced fewer financial difficulties in May. The Consumer Reports Trouble Tracker Index has improved significantly, falling to 53.0 from its spike in April of 63.5, though it remains higher than a year ago (48.5). The improvement in the Trouble Tracker Index was driven by declines in the inability to afford medical bills or medication, down 2.9% pts; experiencing negative changes to credit card terms like increased interest rate, penalty fees, etc., down 1.7% pts; missing payment on a major bill – not mortgage, down 3.8% pts; and losing or facing reduced healthcare coverage, down 1.4% pts.
Confidence is gradually emerging and real improvement in retail may materialize in the coming months. Consumer Reports Past 30-Day Retail Index for May, reflective of April activity, is at 10.9, up slightly from April (10.4). May's Next 30-Day Index is at 9.0, up marginally from last month (8.3). The past 30 days witnessed a modest improvement for major appliance purchasing and a substantial seasonal lift for major yard and garden equipment. The Next 30-Day Retail Index, reflecting May, portends gains for major appliances, home electronics, and personal electronics.
"We are seeing modest improvements across our indices since April, which demonstrate that consumers are starting the long slog out of this historic recession," said Ed Farrell, a director of the Consumer Reports National Research Center. "A full recovery will require a substantial period of growth for consumer confidence to fully take hold."
The Consumer Reports Index report 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: 44.6
- Consumer Reports Sentiment Index is up slightly from the prior month, 44.6 versus 43.7.
Sentiment continues its gradual upward movement. The most optimistic consumers are between the ages of 18-34 (54.9), and with household income of $100,000+ (54.2). The most pessimistic are households with an income of less than $50,000 (40.2) and Americans 65 or older (38.1).
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: 53.0
- 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 has shown significant improvement, pointing to fewer troubles for consumers, falling to 53.0 in May from 63.5 in April.
The key financial difficulties faced by consumers this month included:
- Unable to afford medical bills or medications – 13.7% (Down from 16.6% in April)
- Credit card increased interest rate, penalty fees, etc. – 10.4% (Down from 12.1% in April)
- Missed payment on a major bill – not mortgage – 8.7% (Down from 12.5% in April)
- Lost or reduced healthcare coverage – 7.9% (Down from 9.3% in April)
Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:
- Unable to afford medical bills or medications – 25.5%
- Missed a payment on a major bill (not mortgage) – 15.5%
- Lost or have reduced healthcare coverage – 9.5%
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 – 10.9, Next 30-Day – 9.0
- Consumer Reports Past 30-Day Retail Index for May, reflective of April activity, is at 10.9, up slightly from April (10.4). May's Next 30-Day Index is at 9.0, up marginally from last month (8.3).
Gains in the Past 30-Day Retail Index were fueled by major appliances (7.9%), up from 7.2%; and major yard and garden equipment (7.2%), up from 3.5%.
- The Next 30-Day Retail Index for May, reflecting planned purchasing for that month, is up, supported by gains for major appliances (6.7%), up from 5.6%; major home electronics (10.4%), up from 8.8%; and, personal electronics (16.4%), up from 15.4%.
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: 59.6
- The level of stress consumers feel they are under is down compared to prior months and the Consumer Reports Stress Index is now at 59.6 versus April (63.8) and one year ago (62.0).
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).
Consumer Reports Employment Index: 50.6
- The Consumer Reports Employment Index stands at 50.6 for May, continuing the move into positive territory begun in April (50.4), reflecting net job creation in the prior 30 days. In the past 30 days, 6.0% reported starting a new job, up from 5.0% last month.
