In light of the scores for consumer sentiment, stress and consumer trouble levels, this can be best described as a reluctant rally. Consumer sentiment remains low and relatively steady over the past three months. It stands at 41.8 in December, down slightly from 42.2 in November.
"Despite the fact that the average consumer has not experienced much improvement in their financial lives in the past six months, they appear to be buying more for the holidays," said Ed Farrell, a director of the Consumer Reports National Research Center.
The low but stable consumer sentiment numbers are tied to the Consumer Reports Trouble Tracker Index, which has stalled at 62.0. This measure of financial difficulties had been on the decline since September but this month the decline was halted with 37.2 percent of Americans reporting one or more financial difficulties up from 35.6 percent in November. This increase can be tied to the 15.7 percent of Americans that were unable to afford medical bills or medications in the past 30 days up from 13.7 the prior month.
The Consumer Reports Employment Index is at 48.9 and remains unchanged from November's 49.0. This is reflective of a market that is still shedding jobs. During November 7.4 percent reported loosing their job while only 5.2 percent of Americans started a new job.
"The outlook is for a long-drawn-out period of discomfort for consumers. Though growth has returned to the Retail Index this month, it is possible that we will see a sharp decline below pre-holiday levels as consumers recover from their splurge, and face increased debt," Farrell said.
Regionally the economic picture is mixed with a worsening situation in the Midwest led by a decline in the Consumer Reports Sentiment Index and increase in stress levels. Overall the situation is unchanged in the Northeast, South, and West.
The Consumer Reports Index report is comprised of five key indices: the Sentiment Index, the Trouble Tracker Index, Stress Index, the Retail Index, and the Employment Index. Here are the key findings:
Consumer Reports Retail Index: Past 30-Day 11.2, Next 30-Day 12.2
- Purchasing was up markedly in November (December past 30 day) and planned purchasing for December was strong. The Past 30-Day and Next 30-Day Retail Indices were up substantially. The Past 30-Day Retail Index was up to 11.2 from 9.0 in November, a gain of 24 percent. The Next 30-Day Retail Index stands at 12.2 up from 9.0 the prior month an increase of 36 percent.
- Looking in detail at the categories comprising Consumer Reports Retail Index past 30-day purchasing was up 6.6 percentage points for personal electronics, 6 percentage points for small appliances and 3.3 percentage points for major home electronics versus last month.
- The outlook or Next 30-Day Retail Index for December (12.2), was up significantly versus the prior month 9.0. The bright spots in planned purchasing in December are personal electronics, which rose to 32.9 percent, up 8 percentage points from the prior month; small appliances (18.4%), up 5.5 percentage points; major home electronics (14.2%), up 3.5 percentage points; and even major home appliances (7.0%), up 2.6 percentage points.
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 Trouble Tracker Index: 62.1
The Consumer Reports Trouble Tracker Index has increased steadily through September reaching 68.7 but has fallen back and stabilized at 62.0 in December on par with November (62.1). The key financial difficulties faced by consumers this month included:
- Unable to afford medical bill or medications (15.7%)
- Credit card increased interest rate, penalty fees, etc. (13.4%) [most common among middle income Americans earning $50,000-$99,999 (21%)]
- Missed payment on a major bill-not mortgage (9.4%)
- Lost or reduced healthcare coverage (7.9%)
- Lost job (7.4%)
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, penal 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 Stress Index: 63.0
- The level of stress consumers feel they are under was up slightly in December, likely owing to the holidays. The stress index stands at 63.0 this month up slightly from November (60.5).
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 Consumer Sentiment Index: 41.8
- Since its recent highpoint of 48.5 in June '09, the Consumer Sentiment Index declined to 39.4 in September, which was on par with its low point in October 2008 (37.8). Consumer sentiment has bottomed out this month at 41.8; down slightly from November (42.2) and relatively stable for the last three months. The most optimistic consumers: age 18-34 (49.7), households with income $100K+ (47.7). The most pessimistic: age 35-64 (37.7), households with income less than $50,000 (38.1).
The Sentiment Index captures respondents' attitudes regarding their financial situation, asking them if they are feeling better off 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 Employment Index: 48.9
- The Consumer Reports Employment Index stands at 48.9 for December reflective of net job losses in the prior 30-days. This was on par with November (49.0). In the past 30-days 7.4% of consumers reported losing their job versus 5.2% starting a new job.
