Consumer Reports Index November 2009

The slide in consumer sentiment, which began in July, appears to have bottomed out in November with the index closing at 42.2 even with October (42.1) and up from 39.4 in September. This gain was supported by improvements in most measures except the past 30-day retail index and the employment index, which still points to net job loss.

The improvement in sentiment coincides with a decline in personal financial difficulties and consumer stress. Financial difficulties as measured by the Trouble Tracker have fallen slightly to 62.1 from 65.5 in October and were down significantly from September’s 68.7. The Consumer Stress Index stands at 60.5, down slightly from October (62.3) but well below September (65.4).

The Past 30-Day and Next 30-Day Retail Indices* remain soft. The Past 30-Day Retail Index fell slightly to 9.0 from 10.4 in October and was significantly behind September (11.0). The Next 30-Day Retail Index Stands at 9.0 relatively unchanged over the past 3-months.

Additionally the Employment Index is at 49.0 unchanged from October’s 48.4 reflective of a market that is still shedding jobs.

There are signs of improvements but serious burdens on the recovery exist, led by a poor employment picture as well as a retail environment that remains weak. What we are left with is an uncertain outlook. Though relative stability has returned to the retail index it has not been able to demonstrate growth for three straight periods. With the holiday season fast approaching this has dire implications for expectations this season. The bright spot for retail is in planned purchasing of personal electronics during the month of November and may portend a holiday rally. One-quarter (24.9%) of consumers plan to buy personal electronics this month, up significantly from the month of October (19.9%).

The economy remains in a precarious position where further decline is possible but is slightly less likely. Recovery will be led by further improvements in the consumer’s condition in reduced financial difficulties, as measured by the Trouble Tracker Index, and improvements in both the Employment Index and Retail Indices. Unless consumers can see concrete improvements in their lives and retail activity picks up, any real near-term recovery is improbable.

Summary

Since its recent highpoint of 48.5 in June consumer sentiment declined to 39.4 in September, on par with its low point in October 2008 (37.8). However, consumer sentiment may have bottomed out this month at 42.2, on par with October (42.1) and up from September (39.4). The most optimistic consumers:

• Age 18-34 (48.9) 
• HHLD Income $100K+ (48.6) 

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 increased steadily through September reaching 68.7 but has fallen back to 62.1 in November and was down slightly from October (65.5). The key financial difficulties faced by consumers this month included : 

• Credit cards – increased rates, penalty fees, etc. (15.1%).
• Unable to afford medical bills or medications (13.7%)
• Missed payment on a major bill-not mortgage 9.2%)
• Lost or reduced healthcare coverage (7.6%)
• Lost job (7.1%) 

Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:

• 24% have been unable to afford medical bills or medications
• 10% lost their job or were laid off
• 11% lost or have reduced healthcare coverage
• 13% missed a payment on a major bill (not mortgage)   

The level of stress consumers feel they are under versus a year ago has trended down with the Trouble Tracker. The stress index stands at 60.5 this month down slightly from October (62.3) and significantly improved since September (65.4).

The Employment Index stands at 49.0 for November reflective of net job losses in the prior 30-days. In the past 30-days 7.1% reported losing their job versus 5.1% starting a new job.

The Past 30-Day Retail Index*, which collapsed in August (reflective of prior month sales) falling to 9.5 from 13.0 in July, stabilized in September (11.0) and remained relatively stable through November (9.0) though it was down slightly from October (10.4). Similarly, the Index of Next 30-Day Retail Sales* stabilized at 8.8 in September, and remains unchanged through November (9.0). As we approach the shoulder of the holiday shopping season the potential impact of early shoppers is not apparent and we would hope to see these indices move upwards in the next two months as the holidays grow closer.

Looking in detail at the categories comprising the retail index (major appliances, small appliances, home electronics, personal electronics, major yard/garden equipment), past 30-day purchasing was down slightly across all categories for November relative to October 09.

The Next 30-Day Retail Index for November (9.0), which reflects November planned activity, was up slightly versus 8.3 the prior month. The bright spot in planned purchasing in November is personal electronics, which rose to 24.9% up 5% pts from the prior month (19.9%). Planned purchasing of personal electronics has surpassed the near term high in July 09 (22.1). Major home electronics ticked up slightly to 10.7% from 10.1% in October, its highest level since June .

Among retail categories not included in the index (new car, used car, and new home), past 30-day purchases of new cars (reflects October activity) remained unchanged from the prior month and used car purchasing posted 3.9%, down slightly from the prior month (4.4%). November’s next 30-day planned purchasing (reflects November activity) is down with new cars dropping slightly relative to October and used cars falling substantially to 2.8% from 4.6% in the prior period. Those planning to buy a home were down (1.4%) versus 2.9% for October.

Regionally the picture is mixed with a worsening situation in the North East led by a decline in The Consumer Sentiment Index and Past 30-Day Retail Index. Overall the situation is unchanged in the Midwest, South, and West. The West, however, saw a substantial improvement in the Trouble Tracker Index over the prior month (-11.9), but this was largely offset by declines in the Retail Indices.

 *major appliances, small appliances, home electronics, personal electronics, major yard/garden equipment

Consumer Reports Index October 2009

The slide in consumer sentiment, which began in July, appears to have been stemmed in October with the index closing at 40.3 up slightly from September’s 38.1. However, this improvement is not bolstered by other measures.

The recent decline in sentiment was ushered in by a period of increased personal financial difficulties and consumer stress. Financial difficulties as measured by the Trouble Tracker have risen sharply from the low of 48.5 in May 09 to 62.3 in September and continued to rise for October (66.7) the greatest increase since July. The Consumer Stress Index stands at 63.5, on par with September and up significantly from its low in June 09 of 57.0.

Though recent losses for the Past 30-Day and Next 30-Day Retail Indices* were stemmed in September after a substantial decline in August there was no growth apparent for October.

Additionally the Job index turned downwards in October reflective of heavier job losses in September relative to the prior month.

What we are left with is a truly mixed picture. Though stability has returned to the retail index it has not been able to demonstrate growth for three straight periods. With the holiday season fast approaching this has dire implications for expectations this season.

The economy is in a precarious position balanced between recovery and further decline. Without substantial improvements in the consumer’s condition as measured by the Trouble Tracker Index, Employment Index, and Retail Indices it is doubtful that a meaningful consumer recovery will be mounted in this calendar year.

*major appliances, small appliances, home electronics, personal electronics, major yard/garden equipment

Lessons Learned - The New Thrift

The recession has led consumers to address new behaviors many of which will be with us well into the recovery.

Spending has fallen into ill repute. When asked what they would splurge on when the recession was over 17% would opt for a vacation but, surprisingly, 15% would not splurge on anything. Other splurges included – remodeling home (13%) or a new car (10%).

Some of the most common behaviors adopted by consumers to cope over the past year included:

• Purchased only what you absolutely needed (71%)
• Gone out to dinner less often (61%)
• Spent less on vacations (58%)
• Put less on credit cards (53%)
• Invested more conservatively (51%) 

Some of these will be with us well into the recovery. Consumers with these new behaviors will represent a substantial proportion of the consuming public. The behaviors that will have the greatest impact on the market after the recovery are:

• Reluctance to spend – buying only what is absolutely needed (44% of adults)
• Put less on credit cards (42% of adults)
• Invest more conservatively (38% of adults)
• Put more into savings (35% of adults)  

Consumers have become very cautious in today’s economy . If given a windfall of $10,000 nearly half (48%) would choose to use it to pay off debts (28%) or put it in savings (20%). Another 9% would invest it or save it for college expenses (9%). In total, two-thirds (66%) of consumers would use the $10,000 to address debt or savings/investment.

Method:
The Consumer Reports National Research Center conducted a telephone survey of a nationally representative probability sample of telephone households. 1,009 interviews were completed among adults aged 18+. Interviewing took place over July 30 – August 2, 2009.

The margin of error is +/- 3.2% points at a 95% confidence level

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Consumer Reports Index

From ConsumerReports.org

Economists–and a stock market rally–may be heralding a turnaround in the American economy, but that news hasn't reached many consumers, say the latest results from our new Consumer Reports Index, launched today. The monthly Index, actually a composite of several indices, found consumers less in the mood for shopping for major and minor purchases than they were even four months ago. In fact, these most recent results for the Consumer Reports Index reverse upward trends in several aspects of consumer thinking, according to responses from a nationally representative sample of households polled between July 30 and August 2. Here are some details:

• We feel less well off than a couple of months ago. The Consumer Reports Consumer Sentiment index, which measures Americans' feelings about their personal financial well-being, was down to 41.1 from a high of 48.5 in June. A score above 50 represents optimism
• We're facing increasing financial difficulties. The Consumer Reports Trouble Tracker Index found specific weak spots related to missed payments of major (non-mortgage) bills; credit-card interest rates and fees; and job losses and/or difficulty finding work. One in seven consumers had trouble affording medication or medical bills. (Click here for our free Consumer Reports Health guides to saving money on medication.)
• We're feeling more stress. The Consumer Reports Stress Index reached 63.5, close to its high point of 63.8 in April. An index score of below 50 means lower stress.
• We bought less in the last 30 days, and plan to buy less in the next 30 days. The Consumer Reports Retail Index shows purchases declined the most among small and large appliances. A bright spot was personal electronics--think smart phones–where 22.2 percent of consumers said they'd made purchases; however that was down from 27.1 percent the prior month. In the upcoming month, if the trend continues, consumers plan on buying fewer personal electronics.
  We lost more jobs than we gained. The Consumer Reports Employment Index was 48 percent, down from 49.9 in July. A score of 50 means job equilibrium.
  Read more about the Consumer Reports Index, including how it was conducted, click here.