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Consumer Reports Index Shows Unsteady Economic Progress

Slow Job Creation and Continued Consumer Troubles Cause Americans to be Cautious

YONKERS, NY — The economy continues to make unsteady progress over the last few months.  Troubling signs surrounding the lack of job creation and financial difficulties facing Americans could be driving factors putting the recovery at risk, according to Consumer Reports Index for August.

The Consumer Reports Employment Index is down in August, 50.2, from 51.1 in July barely holding on in positive territory. The overall labor force activity has slowed considerably in the past month with significantly fewer Americans claiming to have started a new job in the past 30-days, 5.9%, versus 7.8% the prior month.

While the Consumer Reports Trouble Tracker Index declined this month to 56.6 from 57.6 the prior month, and is down from its recent high in June (63.5), as well as from a year ago (61.7), the overall specific improvement over the past 30 days were small.  The positive developments for Americans included: a decline in missed mortgage payments to 2.4% from 3.9% in June; and, a drop in the proportion of Americans’ homes entering foreclosure – 0.6% following two months of increases. But the thorn in Americans’ side continues to be healthcare coverage. Nearly one-in-ten (9.7%) reported reduced coverage, up from the prior month (8.9%) and at its highest level recorded since April 2009.  This is another reflection of a weak employment situation.

The Consumer Reports’ Sentiment Index is unchanged for August at 44.7 versus 45.2 in July. It has changed little since October 2009, when it stood at 42.1, and has refused to enter positive territory since it was first measured in October 2008.  Despite recent improvement in employment and retail activity, along with economic news pointing to signs of recovery, consumers remain reserved in their outlook.

“This is a recovery at risk,” said Ed Farrell, a director of the Consumer Reports National Research Center. “There are several factors fueling this uncertainty including job creation which remains anemic along with consumers’ sentiment that’s held steady in negative territory for two years, reflecting that Americans have not seen any real improvement in their financial situations since we entered this recession.”

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: 44.7

•Since October 2009, Consumer Reports Sentiment Index has changed very little. It has crept upwards at a glacial pace, rising from 43.7 in April to 45.2 in July, but now holds at 44.7 for August. The most optimistic consumers are between the ages of 18-34 (53.2) along with households with an income of $100,000+ (53.8).  The most pessimistic consumers are between the ages of 35-64 (43.3) and 65+ (35.0) and households with an income less than $50,000 (40.2).
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: 56.6

•The Consumer Reports Trouble Tracker Index, has shown a decline this month, pointing to fewer troubles for consumers, dropping to 56.6 in August from 57.6 in July and down substantially from June’s 63.5.

•Specific improvements over the past 30 days were small. There were some positive developments led by a decline in consumers missing mortgage payments to 2.4% from the recent high of 3.9% in June as well as a drop in the proportion of Americans’ homes entering foreclosure (0.6%) following two months of increases.

•On the downside, in the past 30 days, 9.7% reported losing or facing reduced healthcare coverage, up from the prior month (8.9%), and at its highest level recorded since April 2009.

•The most common difficulties faced by Americans are:
    Unable to afford medical bills or medications (15.4%), down from 16.0% in July
    Missed payment on a major bill – not mortgage (10.2%), even with July (10.0%)
    Lost or reduced healthcare coverage (9.7%), up from 8.9% in July

•Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days:
    27.0% Have been unable to afford medical bills or medications, up from 22.9 in July
    15.2% Lost or have reduced healthcare coverage, up from 12.5% in July
    17.5% Missed payment on a major bill – not mortgage, up from 15.3% in July

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 – 11.4, Next 30-Day – 8.1

•Consumer Reports Past 30-Day Retail Index for August, reflective of July activity, is at 11.4 – its highest level since the holiday season. The Past 30-Day Retail Index is up from the prior month (10.4) and from one year ago (9.5). Per capita spending for the past 30-days was up slightly for August, reflecting July activity, to $286, from July’s $274 – capping three periods of steady growth.

•The proportion of Americans buying across categories in the past 30 days showed that the largest gains were posted by personal electronics (24.9% up from 22.5%); small appliances (20.3% up from 17.4%); major home electronics (12.7% up from 10.8).

•Among the non-index categories, past 30-day purchases, reflecting July activity, were up slightly for new cars (2.2%) versus the prior month (1.7%), but down for used cars (3.7%) from the prior month (4.8%). Home purchases were also down in August (1.6%) relative to July (2.3%), posting two months of declines.

•Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for August, is at 8.1, down slightly from the prior month (8.5) but better than one year ago (7.5).

•Among the non-index categories, next 30-day planned purchasing points to new cars gaining slightly, 3.1% versus 2.5% the prior month, while used cars remains flat month-over-month at 4.3%. Planned purchasing for homes is even with the prior month (1.7%).

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: 59.4

•According to the Consumer Reports Stress Index, the level of stress consumers feel they are under (59.4) is unchanged from the prior month (61.0), but down from one year ago (63.5).
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 Employment Index: 50.2

•The Consumer Reports Employment Index is down in August (50.2) from 51.1 in July barely holding on in positive territory. In four of the past five periods, the employment index has been in positive territory.

•Overall labor force activity has slowed considerably in the past month, with significantly fewer Americans claiming to have started a new job in the past 30 days, 5.9% versus 7.8% the prior month.
 
•Job losses (5.6%) in the past 30 days were unchanged from the prior period.

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.
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 1,259 interviews were completed (1,009 telephone & 250 cell phones) among adults aged 18+. Interviewing took place between July 29 –August 1, 2010. The margin of error is +/- 2.8 points at a 95% confidence level. The complete index report, methodology, and tabular information are available.

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