Consumers in the mood to splurge, electronics leads gains

December 12th, 2011

An issue of Consumer Reports magazine

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,” added Farrell.

The Consumer Reports Index report, available at www.ConsumerReports.org, comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress 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.

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Consumers in the mood to splurge, electronics leads gains

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