Consumer Reports Index finds increased credit card woes help drive consumer sentiment to lowest level in the past seven months

Retail index remains stable; Consumers show more interest in home and car shopping

Yonkers, NY — Americans feel far worse about their financial situation than they have in the past seven months and continue to be pounded by financial woes driven by increased credit card, healthcare and personal loan issues, according to the Consumer Reports Index September ‘09 Report.

The Consumer Reports Sentiment Index is at the lowest level (38.1) the organization has seen since October ’08. In the meantime, the Consumer Reports Trouble Tracker continues to creep up to its highest level in the past seven months with almost 38 percent of Americans experiencing at least one major negative personal finance event in the past 30 days.

While consumers continue to be distressed about their personal financial situation, there are indications their outlook may have stabilized. The Consumer Reports Retail Index remained stable from the previous month, while interest in shopping for large ticket items like a new home, and new and used cars looks strong for the month of September. Another positive, the Consumer Reports Employment Index (50.3) showed a significant improvement during August.

“Despite the negative forces consumers are facing, we have seen some stabilization and improvement in key indicators that suggest we could see and improvement in consumer sentiment over the next month,” said Ed Farrell, Director of the Consumer Reports National Research Center.

The Consumer Reports Index report, available at www.ConsumerReports.org, 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 Consumer Sentiment Index: 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.

• The Consumer Reports Sentiment Index dropped to 38.1 in September ’09 from 41.1 in the previous month. Consumer sentiment continues to slide from its highpoint of 48.5 in June ’09. Currently sentiment levels are as low as Consumer Reports has seen them since October ’08 (37.8). This current and continuing decline follows a period of improving consumer expectations, (October ‘08 through June ‘09), which at that time, might have suggested a budding recovery.

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.

• Consumers are being buffeted by negative events. The Consumer Reports Trouble Tracker Index has reached it highest level since Index was launched seven months ago. (62.3). The Trouble Tracker continues to creep upward from its low point in May ’09 (48.5), but it remains steady, only 0.6 points above the prior month. The rise in the September Trouble Tracker Index was driven by increases in:
  • Credit cards—increased rate, penalty fees, etc. (15.6% of Americans)
  • Lost or reduced healthcare coverage (8.5% of Americans)
  • Denial of a personal loan (6.0% of Americans)
• For the sixth straight month, the ability to afford medical bills or medications remains the most prominent trouble Americans are reporting in September ‘09.
• 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
  • 7.4% lost their job or were laid off
  • 12.2% lost or have reduced healthcare coverage
  • 14% missed a payment on a major bill (not mortgage)
• Perhaps the most positive news from the September ’09 Trouble Tracker Index, (reflecting August ’09), reported job loss was down. Only 5.6 percent of Americans reported losing a job or being laid off in the past month, down from 7.6 percent from the August ’09 report.

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 & 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.

• The Consumer Reports Retail Index for the past 30 days (reflecting August ‘09 activity), which collapsed last month—falling to 9.5 from 13.0 in July ‘09, has stabilized this month (9.7). Similarly, the Consumer Reports Retail Outlook for the next 30 days (reflecting planned activity) has stabilized at 7.5 and is on par with the August ’09 Retail Outlook (7.5).
• Looking in detail at the categories comprising the Consumer Reports Retail Index, purchasing in the past 30 days was up slightly for personal electronics and small appliances in the month of August compared to July, but flat for all other categories.
• The Consumer Reports Retail Outlook for September ‘09 (7.5), which reflects planned activity for the next 30 days, was on par with planned activity in August ‘09 (7.5).
• Among large-ticket retail categories not included in the Retail Index: new car, used car, and new homes past 30-day purchases of new cars was up to 2.9 percent in August ’09 from 2 percent in July. Used car purchases also showed significant gains—up 5.2 percent from 3.6 percent the month before. Home purchases were down substantially in August to 1.2 percent.
• The Consumer Reports Retail Outlook for planned purchasing in the next 30 days of September looks strong relative to August. The level of consumer interest in purchasing a new car is maintaining the gains seen last month. In addition, the intent to purchase a used car has risen substantially to 5.7 percent, and the number of consumers planning to buy a home in September is up to 2.6 percent from 1.2 percent in the prior month.

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).

• The overall level of stress that consumers are feeling is up from a year ago. However, since April ‘09 (63.8) the amount of stress consumers were reporting had steadily declined through June ‘09 (57.0). In July ‘09 the Consumer Reports Stress Index rose slightly to 58.4 and has continued to increase to 65.7 in September ‘09.

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.

• The Consumer Reports Employment Index improved significantly in September ’09 to 50.3 from 48.0 last month. The improvement was a result of the decline in reported job losses in the past 30 days (reflecting August ‘09), and an increase of those reporting starting a new job in this period.