Retailer Daily

Consumer Spending Shows Some Vitality - Update

US consumer spending behavior showed some signs of improvement in July 2010, according to the new Consumer Reports Index.

Retail Spending Grows in July

The Consumer Reports Past 30-Day Retail Index for August 2010, reflective of July 2010 activity, is at 11.4, up from 10.4 in July 2010 and 9.5 in August 2009. 10.8 Per capita spending for the index categories in the past 30 days was up slightly for August, reflecting July activity, to $286, from July’s $274, capping three straight months 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%); and major home electronics (12.7%, up from 10.8%).

The Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for August 2010, is at 8.1, slightly down from 8.5 the prior two months, but an improvement from 7.5 in August 2009.
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.

Financial Sentiment Dips Slightly

From April – July 2010, the Consumer Reports Sentiment Index crept upwards, rising from 43.7 in April to 45.2 in July. Sentiment is slightly down to 44.7 in Augus. For the second straight month, the most optimistic consumers are between the ages of 18-34 (53.2) along with households with an income of $100,000 or more (53.8).  The most pessimistic consumers are between the ages of 35-64 (43.3) and 65 and older (35) and households with an income less than $50,000 (40.2).

Also demonstrating declining consumer confidence, the Conference Board Consumer Confidence Index fell again in July 2010, its second straight decline after three straight months of improvement. The Index fell from 54.3 to 50.4, with both the Present Situation Index and forward-looking Expectations Index significantly declining. However, the Expectations Index still stands at a relatively high score of 66.6, demonstrating optimism, while the Present Situation Index is slumped at 29.5, indicating a lack of present-day confidence.

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.

Consumers Report Fewer Troubles

One area of continued improvement was the Trouble Tracker Index, which measures consumer financial difficulties and negative events.  The Consumer Reports Trouble Tracker Index has shown a decline for the second straight month, pointing to fewer troubles for consumers, dropping to 56.6 in August from 57.6 in July and 63.5 in June. The most notable improvement was in the proportion of Americans that missed a mortgage payment, down to 2.4% from 3.9% the prior month.

Specific improvements during 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 2010, 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% of consumers 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% in July.
• Missed payment on a major bill – not mortgage (10.2%), even with July.
• Lost or reduced healthcare coverage (9.7%), up from 8.9% in July.
• One consumer difficulty has steadily diminished during the past several months. Reported negative changes to credit card terms has fallen to 8.1% in July from 9.5% in June, and is well below its high point of September 2009 (16.1%).

Lower-income Households Have Tougher Time

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

• 27% 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.

Employment Index Declines after Three Straight Improvements

The Consumer Reports Employment Index is down in August (50.2) from 51.1 in July 2010, barely holding on in positive territory. In four of the past five periods, the employment index has been in positive territory, and the index grew monthly from May-July.

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% compared to 7.8% the prior month. Job losses (5.6%) in the past 30 days were unchanged from the prior period.

Overall, the official U.S. unemployment rate remained flat at 9.5% in July 2010. The U.S. economy shed 131,000 non-farm payroll jobs in July as federal government employment fell with 143,000 temporary workers hired for the decennial census completing their work. Private-sector payroll employment edged up by 71,000, however.

The Consumer Reports Employment Index examines the change in employment of those that reported starting a new job compared to those that have lost their job or were laid off in the past 30 days. An index less than 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.

Stress Mildly Declines

According to the Consumer Reports Stress Index, the level of stress consumers feel they are under (59.4) is down slightly from the prior month (61) and August 2010 (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).

About the Data: A total of 1,259 interviews were completed (1,009 telephone & 250 cell phones) among adults aged 18 and older. Interviewing took place between July 29 and August 1, 2010.