Consumer Reports Index: Consumers More Optimistic as Sentiment, Stress and Trouble Tracker Levels Improve

Consumers ended 2009 more optimistic than they have been in the past six months as the January Consumer Reports Index shows Sentiment, Stress and Trouble Tracker levels improving.
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YONKERS, N.Y. -- Consumers ended 2009 more optimistic than they have been in the past six months as the January Consumer Reports Index shows Sentiment, Stress and Trouble Tracker levels improving.

The Consumer Reports Sentiment Index has shown its first meaningful up tick since June, climbing to 44.1 from 41.8 in December. The rise in consumer sentiment is tied to a decline in the Consumer Reports Trouble Tracker Index. The Trouble Tracker, which measures the amount of financial difficulties consumers face, now stands at 58.2 -- its lowest level in the past five months.

Retail shoppers showed up for the 2009 holiday season. Purchases in December were strong building on already sizable gains in November. Consumer purchasing was up about 26% in December from the prior month. The Consumer Reports Past 30-Day Retail Index for January (reflective of December activity) rose to 14.1 from 11.2 the prior month.

Since October, the Consumer Reports Past 30-Day Retail Index has gained 57 percent. Gains over the prior month were driven by purchasers of personal electronics (34.7%), major home electronics (15.8%) and major home appliances (9.6%).

Not surprisingly, January's retail outlook for planned purchase in the next 30 days has retreated to 8.9, a decline of 27% from December and comparable to the pre-holiday levels of September (8.8). The drop in the Next 30-Day Retail Index was driven by a decline in intent to purchase across most categories with the exception of major home appliance.

"There is always some level of seasonal pull back to retail spending habits in January owing to the holiday splurge. We will be looking closely at the Retail Index numbers for the first quarter of 2010 as a better indicator of how well the retail sector is fairing," said Ed Farrell, a director of the Consumer Reports National Research Center.

The Consumer Reports Employment Index (49.3) remains statistically unchanged from the prior month and reflective of a job market that is still shedding more jobs than it's creating. The one improvement was a decline in Americans claiming to have lost a job in the past 30 days, down to 6 percent from 7.4 percent the prior month.

"Our Index shows the economy is gradually improving for consumers with positive movement for many key economic indicators. Employment numbers continue to drag the economy's recovery. It's not just the hardships of the unemployed, it's also the uncertainty it fosters for the future among all Americans," Farrell said.

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 Sentiment Index: 44.1
-- The Consumer Sentiment Index had its first meaningful uptick this
month since June '09 at 44.1 up from 41.8 the prior month. Consumer
sentiment may be poised to begin a period of improvement. The most
optimistic consumers were ages 18-34 (49.1) and households with income
between $50,000 and $99,000 (50.3). The most pessimistic consumers
were in households with income less that $50,000 (39.1).

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.

Consumer Reports Trouble Tracker Index: 58.2
-- The Consumer Reports Trouble Tracker Index has shown improvement over
the past several months, falling to 58.2 in January from 62.0 in
December. This is a continuation of a downward trend from September
(68.7). The key financial difficulties faced by consumers this month
included:
-- Credit card issue: increased interest rate, penalty fees, etc.
(14.4%)
-- Unable to afford medical bill or medications (12.7%)
-- Missed payment on a major bill, but not a mortgage (8.7%)
-- Lost or reduced healthcare coverage (8.0%)
-- Lost job (6.0%)

-- Lower-income households, earning less than $50,000 a year, have been
disproportionately affected. In the past 30 days:
-- 21.3% have been unable to afford medical bills or medications
-- 9.4% lost their job or were laid off
-- 11.1% lost or have reduced healthcare coverage
-- 13.9% missed a payment on a major bill (not mortgage)

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 14.1, Next 30-Day 8.9
-- Despite lackluster retail numbers since August '09, December finished
strong building on the gains in November. Consumer Reports Past 30-Day
Retail Index rose to 14.1 from 11.2 in November.
-- Consumer Reports Next 30-Day Retail Index for January, reflecting
planned purchasing for that month, has retreated to 8.9, down from
12.2 for December. Planned purchasing of major home appliances was the
only category that demonstrated a gain for January (7.8%) up slightly
from December (7.0%) and is at its highest level in months.
-- Among retail categories not included in Consumer Reports Retail Index,
December purchases of new and used cars, as well as homes remained
unchanged from the prior month. The outlook for planned purchasing in
the month of January is down for used cars at 3.4% versus 4.7% the
prior month, while new car, and new home planned purchasing remains
unchanged from the prior month.

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: 59.0
-- The level of stress consumers feel they are under is down this month
despite the stresses imparted by the holidays. The Stress Index stands
at 59.0 this month, down from 63.0 in December.

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: 49.3
-- The Employment Index stands at 49.3 for January, reflective of net job
losses in the prior 30 days, and on par with December (48.9). In the
past 30 days, 6.0% of Americans reported losing their job versus 4.7%
who claimed to start a new job.

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 1,275 interviews were completed (1,024 households, 251 cell phone) among adults aged 18+. Interviewing took place between January 7 and January 10, 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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