CR Index: Consumers are advancing ... slowly

The climb out of this recession remains slow with frequent setbacks. In July the economy and the consumer are once again gaining traction. But unlike most recoveries, where the climb out is roughly linear, we are seeing many ups and downs as consumers once again try to regain their footing.

The truly bright spot for July is Americans who are heading back to work, with the employment index climbing into positive territory and gains posted in three of the last four months. Job creation increased to its highest level in July (7.8), adding to three months of improved hiring. The Employment Index has moved back into positive territory (51.1), its highest reading since April 2009.

The Trouble Tracker Index, the measure of financial difficulties faced by consumers in the past 30 days, declined to 57.6 from 63.5 the prior month, and is slightly below July of last year (58.8). The most notable improvement was in the proportion of Americans that missed a mortgage payment, down to 2.4 percent from 3.9 percent the prior month.

Per capita retail spending was up in July and is hopefully a sign of growing confidence among consumers. Among the non-index categories, past 30-day purchases was down for new cars (1.7 percent) and used cars (4.8 percent) from the prior month. Home purchases were also down in July (2.3 percent) relative to June (3.1 percent), halting three straight months of increases.

Though showing improvement, some dogged problems remain. Sixteen percent of Americans were unable to afford medical bill or medications, while 8.9 percent lost or had reduced health care coverage. Problems in affording healthcare are well above levels seen in  2009. Another worrisome development in the Trouble Tracker is a rise in Americans' homes going into foreclosure in the past 30 days. Foreclosures were reported by 1.3 percent of consumers in June, capping three straight months of increases.

In addition, the Stress Index, a measure of the stress consumers feel in their everyday lives versus a year ago, was up slightly in July to 61.0 from 57.6 the prior month and 58.4 one year ago.

Over the past four months, Consumer Sentiment has crept upwards at a glacial pace, rising from 43.7 in April to 45.2 in July. Despite advances in employment and declining consumer difficulties, Consumer Sentiment stands at 45.2, virtually unchanged from June (45.0).

The Consumer Reports Index report comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. It is conducted by the Consumer Reports National Research Center and is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,258 interviews were completed (1,007 telephone & 251 cell phones) among adults aged 18+. Interviewing took place between June 24 and June 27, 2010. The margin of error is +/- 2.8 points at a 95 percent confidence level.—Mandy Walker