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CR Index: Consumers are more gloomy and stressed out

Consumer Reports News: May 10, 2011 09:21 AM

High gas prices, rising inflation, and increasing financial troubles has taken a toll on consumers. The Consumer Reports Sentiment Index fell significantly in the May report to 45.7 from 50.2 the prior month, and is once again in negative territory.

Along with the decline in consumer sentiment, the Trouble Tracker Index was up slightly to 48.3 from 44.5 in April, which means consumers faced more financial difficulties in the past month. A larger number reported that they missed a payment on a major bill (other than their mortgage), lost or faced reduced health-care coverage, and had negative changes to their credit-card terms (including increased interest rates, penalty fees, and reduced credit lines).

CR-indexMay11_img2.jpgThe decline in consumer sentiment had an impact on retail activity. In May, the Past 30-Day Retail Index declined to 11.7 from 12.6 a month earlier. Similarly, the Next 30-Day Retail Index, reflecting planned spending in May, is down to 8.2 from 9.4 the prior month. Declines in retail also were evident in the non-index categories of new-car and used-car purchases. Past 30-day purchases of new cars and used cars were down compared with both the prior month and prior year.

The Stress Index, a measure of the stress consumers feel in their everyday lives versus a year ago, is up to 60.3 from 56.8 in April. The Stress Index is now at its highest level since December 2010.

Despite all these negative findings, the Consumer Reports Employment Index has continued to improve. In May, the Employment Index was 51.1, up from 50.5 the prior month, indicating an improving jobs outlook. In both April and May, more Americans started a new job than have lost a job. Unemployment has been a major burden on the economy, but two months of job growth may mark the beginning of a strengthening jobs market.

“Our findings really show the impact of declining consumer sentiment,” says Ed Farrell, a director of the Consumer Reports National Research Center. “Despite an improving employment picture, retail activity has declined, and rising fuel prices and subsequently inflation are forcing consumers to make hard choices with their money. The uptick in the percentage of consumers who missed payments on major bills shows that the impact reaches deep into their personal finances.”

The Consumer Reports Index is based on five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. It is a monthly poll of a nationally representative probability sample of American adults conducted by the Consumer Reports National Research Center. A total of 1,259 interviews were completed (1,009 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between April 28 and May 1. The margin of error is +/- 2.8 percentage points at a 95% confidence level.

Mandy Walker

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