Consumers are more optimistic, with sentiment numbers climbing to their highest level in more than two years, according to the Consumer Reports Index for January. The Consumer Reports Sentiment Index (48.7), which captures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago, is up from the prior month (45.1), from one year ago (44.1), and is at its highest level since October, 2008.
They are likely feeling better because they are facing fewer financial difficulties than they did one year ago. The Consumer Reports Trouble Tracker Index (54.2) is down from last January (58.2). The Trouble Tracker Index focuses on both the proportion of consumers that have faced financial difficulties during the previous month as well as the number of negative events they have encountered.
And as the holidays recede, the Consumer Reports Stress Index, a measure of the stress consumers feel in their everyday lives versus a year ago, is down significantly in January to 55.4 from 60.8 the prior month and from one year ago (59.0). Beyond the expected seasonal drop, consumer stress is now at its lowest level since this measure was tracked beginning in April, 2009. Though stress is still elevated (above 50), there has been a real improvement among consumers.
Consumer retail spending for December showed modest gains versus one year ago. The Consumer Reports Past 30-Day Retail Index (reflecting purchases made in several product categories in December) came in at 15.4, up slightly from 14.1 last year, despite last month's index results showing consumers' hesitation to spend. December's gains were closely associated with purchases of major home electronics. One-fifth of respondents (20.8 percent) purchased major home electronics in December, up significantly from last year (15.8 percent).
However, the Consumer Reports Next 30-Day Retail Index for January, reflecting planned purchases in January, is 8.3, down slightly from one year ago (8.9), with personal electronics and major home appliances the hardest-hit categories.
"Overall, January is the most positive report for the Consumer Reports Index to date, and clearly indicates that consumers are feeling better about their situation and once again are prepared to look forward and begin to engage more fully with the economy,"? said Ed Farrell, a director of the Consumer Reports National Research Center. "The key remaining stumbling block is employment."? Indeed, the Consumer Reports Employment Index remains weak in January (49.2), and is unchanged from the prior month (49.2). In the past 30 days, the proportion of Americans that have lost their job is down to 6.5%, from 7.4% a month earlier. But the number of Americans that have started a job in the past 30 days (4.9%) is also down compared to a month earlier (5.7%).
The Consumer Reports Index comprises five key indices: the Sentiment Index, the Trouble Tracker Index, the Stress Index, the Retail Index, and the Employment Index. Conducted by the Consumer Reports National Research Center, it is a monthly telephone and cell phone poll of a nationally representative probability sample of American adults. A total of 1,259 interviews were completed (1,009 telephone and 250 cell phone) among adults aged 18+. Interviewing took place between January 6 and January 9, 2010. The margin of error is +/- 2.8 points at a 95% confidence level."â?Mandy Walker
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