U.S. Consumers Appear Optimistic in New Year - Update
The January 2010 Consumer Reports Index demonstrates that U.S. consumers are feeling more optimistic as they begin a new year. The Consumer Sentiment, Trouble Tracker, and Stress indices all demonstrated notable improvement from December 2009.
After declining from June-September 2009, and hitting a near-historic low of 38.1 in September, the Index hit adjusted scores of 42.1 in October and 42.2 in November. For December, the Index showed incremental decline with a score of 41.8. The Index, which indicates financial optimism when it surpasses 50, reached a high of 48.5 in June 2009 and had been increasing on a monthly basis since hitting a low point of 37.8 in October 2008.
The December 2009 Consumer Confidence Index also demonstrates improving consumer sentiments about their financial situation for 2010. The Index rose for the second straight month, from 50.6 to 52.9. The forward-looking Expectations Index increased substantially, following a slight November gain, driving the entire Consumer Confidence Index growth. The Present Situation Index, which remained virtually unchanged in November, fell notably in December.
Consumers Say Trouble Me No More
The Trouble Tracker Index, which focuses on both the proportion of consumers that have faced difficulties as well as the number of negative events they have encountered, has been notably improving since hitting its highest reading ever in September 2009, 68.7.
The Index, which reads 58.2 this month, declined to 65.5 in October, 62.1 in November and 62 in December. While this is a positive sign, it is worth noting that the Trouble Tracker is still well above its low point of 48.5, reached in May 2009.
The negative events followed by the Trouble Tracker include: the inability to pay medical bills or afford medication, missed mortgage payments, home foreclosure, interest rate increase, penalties 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.
This month, the key difficulties faced by consumers were credit card issues (14.4%), inability to afford medical bills or medication (12.7%), missed payments on major bills not including mortgages (8.7%), lost or reduced healthcare coverage (8%) and lost jobs (6%). The Consumer Reports Trouble Tracker Index is 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.
Stress Eases with End of Holidays
Not surprisingly, the passing of the end-of-year holidays resulted in lower consumer stress levels. The January 2010 Stress Index dropped from 63 in December 2009 to 59. The index can vary from 100 (total stress) to a low of 0 (no stress). In September, the Stress hit an all-time high of 65.7, but dropped to an adjusted score of 62.3 in October and 60.5 in November, ending a steady upward progression since declining from 63.8 in April 2009 to 57 in June 2009.
Holidays Boost Consumer Spending
After taking a significant fall in August 2009 and remaining fairly steady from September – November, the Past-30 Day Retail Index increased from 11.2 to 14.1 in December 2009, reflecting end-of-year holiday spending. For January 2010, the Next-Day 30 Retail Index score made an expected post-holiday drop from 12.2 to 8.9.
Two recent reports on 2009 holiday sales performance confirm that consumer spending rose in December 2009. According to the Weekly Chain Store Sales Snapshot compiled by the International Council of Shopping Centers (ICSC) and Goldman-Sachs, chain store sales grew 2.8% during December 2009.
In addition, digital marketing firm comScore reports that during the 63-day holiday shopping period between November 1 and December 31, 2009, U.S. consumers spent $29.1 billion online. This marked a 4% increase from $27.9 billion U.S. consumers spent online during the equivalent period in 2008.
While comScore’s research tracks November as well as December 2009, the firm also reported that December 19-20, 2009, featured a strong 13% growth rate as online sales rose from $677 million during the final weekend before Christmas 2008 to $767 million. Other strong e-commerce sales figures from December include a year-over-year e-commerce sales growth rate of 6% for the full week ending December 20, 2009, as it grew from $4.5 billion to a one-week sales record of roughly $4.8 billion in online spending. Tuesday, December 15, 2009 set an all-time single-day record for e-commerce sales with $913 million, and each day from Monday, December 14 through Thursday December 17 saw at least $800 million in online spending.
Employment Index Slightly Rises
The Employment Index, which 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, slightly rose from 48.9 in December 2009 to 49.3 in January 2010. In the past 30 days, 6.0% of Americans reported losing their job versus 4.7% who claimed to start a new job.
The official December 2009 Employment Situation Summary roughly corroborates the findings of the Employment Index. According to the Bureau of Labor Statistics, the U.S. unemployment rate remained flat at 10% for the month, with the economy shedding 85,000 non-farm payroll jobs.
An Employment Index score 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 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 1,275 interviews were completed (1,024 households, 251 cell phone) among adults aged 18+. Interviewing took place between January 7 and January 10, 2010.