Retailer Daily

Consumer Situation Shows Some Improvement - Update

Consumers have slightly increased retail spending in certain categories, show moderate but steady financial optimism and report fewer economic troubles than October 2009, according to the October 2010 Consumer Reports Index.

Electronics, Appliance Purchases Slightly Increase

The Consumer Reports Past 30-Day Retail Index for October 2010, reflective of September 2010 activity, is 9.9, on par with the prior month (9.8), but down compared to one year ago (10.4). Looking at the category purchases during the past 30 days, there were slight increases for personal electronics (23.2%, up 1.8 percentage points) and small appliances (18.5%, up 1.9 percentage points). Among the non-index categories for past 30-day purchases, new cars (3%) were up slightly compared to the prior month (1.7%), but used cars (4%) were down from the prior month (5.1%). Home purchases were off slightly (2 %) relative to September 2010 (2.5%). Meanwhile, the Consumer Reports Next 30-Day Retail Index, reflective of planned purchases for October 2010, is at 7.4, posting three months of decline from July 2010’s recent high of 8.5, and also is down from a year ago (8.3). Within the Next 30-Day Retail Index, only small appliances posted a slight gain from the prior month. Among non-index categories, new cars (2.2%) and used cars (3.3%) are holding steady relative to the prior month. Planned purchasing for homes (3%) in the next 30 days, reflecting planned October 2010 activity, is up versus the prior month (1.5%), and is at its strongest level of the past nine months. 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.

Younger, Wealthier Consumers Most Optimistic

The Consumer Reports Sentiment Index has changed little since October 2009, and now stands at 44.8, slightly up from September 2010 (44.1). The most optimistic consumers are between the ages of 18-34 (54.3), and those with household incomes of $100,000 or more (51.2). The most pessimistic consumers are between the ages of 35-64 (41.9) and 65 or older (37.2), and those with household incomes less than $50,000 (40.9). 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.

Troubles Substantially Drop from October ‘09

The Consumer Reports Trouble Tracker Index showed further improvement this month, pointing to fewer troubles for consumers, dropping to 50.5 in October 2010 from 53.7 in September 2010, and is down substantially from one year ago (65.5). Positive developments were led by a decline in consumers unable to afford medical care or medications, to 12.7% from 13.6% in September 2010; and a drop in the proportion of Americans who missed a payment on a major bill (8.7%), down from the prior month (9.3%). On the downside, in the past 30 days, 3% of consumers reported that they have missed a payment on their mortgage, up from 2.4% in September 2010. The leading problems faced by consumers include:

• Unable to afford medical bills or medications (12.7%).
• Missed payment on a major bill – not mortgage (8.7%).
• Credit card increased rates/fees, reduced credit line (7.6%).

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

• Unable to afford medical bills or medications (20.6%).
• Missed payment on a major bill – not mortgage (14.4%).
• Credit card increased rates/fees, reduced credit line (10.1%).

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.

Employment Remains Sluggish

The Consumer Reports Employment Index is up slightly in October (49.5) from the prior month (49.1). However, overall labor force activity is sluggish, with fewer Americans claiming to have started a new job in the past 30 days, 5.7%, than the 6.7% that lost their job. Job gains were up slightly from the prior month (5%). Job losses in the past 30 days (6.7%) were largely unchanged from September 2010 (6.9%). Americans earning less than $50,000 annually have been hit the hardest with job losses (10.4%). 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.

Consumers Feel Most Stress Since Spring

The Consumer Reports Stress Index is up to 63.2 in October from 60.1 the prior month. Stress has steadily increased during the past two months, and now stands at its highest level since April 2010 (63.8). 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).

NRF Predicts Moderate Holiday Sales Growth

In a sign of increased end-of-year consumer spending, the National Retail Federation predicts holiday sales in 2010 will improve 2.3% from $437.6 billion to $447.1 billion. While this year’s projected growth in November-December 2010 holiday sales remains slightly lower than the 10-year average holiday sales increase of 2.5%, it would be a marked improvement from both last year’s 0.4% uptick and the 3.9% holiday sales decline retailers experienced in 2008. About the Data: 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 1,265 interviews were completed (1,014 telephone and 251 cell phone) among adults aged 18 and older. Interviewing took place between September 30 – October 3, 2010.