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December 9, 2011

Holiday Retail Season Starts Strong, Despite Stagnant Consumer Confidence

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Personal electronics lead relatively strong holiday season outlook for retailers with consumers, proving they are in the mood to shop

YONKERS, NY — December’s Consumer Reports Index, a measure of overall consumer financial health, showed that despite flagging confidence and a weak employment picture, the holiday season is off to a good start, with excellent activity in November and the prospect of a strong December.=

After several years of reining in spending, consumers are in the mood to splurge this holiday season with activity up substantially over last year. The Past 30-Day Retail Index for December was 13.9, up from 12.4 a year ago, and planned spending for December was also strong at 12.7 compared to 11.8 last year. Among the categories comprising the Retail Index, the largest gains were in personal electronics.

Though there has been no improvement in Consumer Sentiment or in the financial difficulties faced by consumers, overall, measures are fairly stable.

“It may be this relative stability in contrast to the gloom of the past several years, that is causing consumers to cast off the restraint of the seasons gone by and ‘celebrate’ with some serious shopping,” said Ed Farrell, director of the Consumer Reports National Research Center.

December’s Consumer Reports Sentiment Index, which measures how consumers are doing financially versus a year ago, was unchanged at 45.4 from 45.0 the prior month.

The Consumer Reports Employment Index declined to 49.6 from 50.6 last month, with past 30-day job losses (5.7%) outpacing job gains (4.9%). This setback reversed three straight periods of an improving employment picture. Households earning $50,000 or more remained in positive territory (over 50), while those in households earning less than $50,000 lost ground (49.0).

The Consumer Reports Trouble Tracker Index, a gauge of the breadth and depth of financial difficulties among American households, was unchanged, registering 49.9 compared to 50.0 in November. The Trouble Tracker did improve slightly from a year ago (52.7). Despite stability in the index overall compared to last month, the proportion of Americans reporting health care coverage cuts in the past 30 days was up substantially to 9.2% from 5.8%.

“The outlook is for a relatively strong holiday season for retailers as consumers are spending, but with so many other indicators in negative territory, we could be setting ourselves up for a first quarter where we’ll need to face some dramatic financial realities,” Farrell said.

The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, theStress Index, the Retail Index, and the Employment Index. Here are the key findings:

Consumer Reports Sentiment Index: 45.4*

Consumer Reports Sentiment Index (45.4) was unchanged from last month (45.0) and remains entrenched in negative territory (below 50).

Respondents age 18-34 and households with income of $100,000 or more remained the most optimistic consumers, while the most pessimistic consumers were households with income less than $50,000 and respondents age 65 and older.

  • Ages 18-34, unchanged from the month prior (54.5).
  • Households with income of $100,000 or more (56.1), up from 52.8 in November.
  • Households with income less than $50,000 (40.3), down slightly from 41.6 the prior month.
  • Those who are age 65 and older (36.3), down from 37.3 in November.

* 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.

Consumer Reports Trouble Tracker Index: 49.9*

  • The Consumer Reports Trouble Tracker Index was 49.9 this month, unchanged from 50.0 the prior month. The most prevalent consumer troubles included: inability to pay for medical bills or medications; missed payments on a major bill other than a mortgage; and, lost or reduced health care coverage.
  • Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days: 20.0% were unable to afford medical bills or medications; 13.5% missed payment on a major bill (not a mortgage); and, 12.5% lost or reduced health care coverage.

*  The Consumer Reports Trouble Tracker Index 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 health-care 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 – 13.9, Next 30-Day – 12.7*

  • Consumers are ready to spend this holiday season. Retail activity increased over the past 30 days, and projected spending over the next 30 days also was up. The Consumer Reports Past 30-Day Retail Index*, reflecting November activity, was 13.9, up from 9.1 the prior month and from a year ago (12.4).  The Consumer Reports Next 30-Day Retail Index*, reflecting planned purchasing in December, increased to 12.7 from 11.1 the prior month and was also up from 11.8 in December 2010.
  • Taking a closer look at the categories comprising the Consumer Reports Past 30-Day Retail Index, the gain in November spending was the result of an increase in personal electronics (31.4%), up from 21.2% last month.
  • The Consumer Reports Next 30-Day Retail Index was 12.7, up from last month (11.1%). Improvements in planned purchasing were also driven by personal electronics (31.5%), up from 22.5% a month earlier.
  • Among the retail categories not included in the index, past 30-day purchases, reflecting November activity, were flat versus last month for new cars at 2.7%, used cars at 4.6% and home purchasing at 2.7%.
  • Purchasing over the next 30 days, reflecting planned December activity, also changed little for new cars and used cars. Planned home purchasing in the next 30 days is expected to dip to 1.6% versus 2.4% 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 Employment Index: 49.6*

  • The Consumer Reports Employment Index declined for the first time in four months to 49.6. In the report, 5.7% said they lost their job, compared with 4.9% that started a new job in the same period.
  • While the South, North Central and West regions remained unchanged, the North East showed a marked decline.

*  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.

Consumer Reports Stress Index: 61.6*

  • This month, as in Decembers past, the Stress Index was up. It rose to 61.6 from 58.7 in November. Those feeling the most stress were women (63.7), middle-income consumers (62.4), and those living in the West (66.0).

*  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).

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 1,023 interviews were completed (771 telephone and 252 cell phone) among adults aged 18+. Interviewing took place between December 1 and December 4. The margin of error is +/- 3.2 percentage points at a 95% confidence level. The complete index report, methodology, and tabular information are available. Contact: C. Matt Fields 914-378-2454. cfields@consumer.org.

DECEMBER   2011

© Consumers Union 2011.  The material above is intended for legitimate news entities only; it may not be used for advertising or promotional purposes. Consumer Reports® is published by Consumers Union, an expert, independent nonprofit organization whose mission is to work for a fair, just, and safe marketplace for all consumers and to empower consumers to protect themselves.  We accept no advertising and pay for all the products we test. We are not beholden to any commercial interest. Our income is derived from the sale of Consumer Reports®ConsumerReports.org® and our other publications and information products, services, fees, and noncommercial contributions and grants. Our Ratings and reports are intended solely for the use of our readers. Neither the Ratings nor the reports may be used in advertising or for any other commercial purpose without our permission. Consumers Union will take all steps open to it to prevent commercial use of its materials, its name, or the name of Consumer Reports®.


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