While the recent Christmas shopping season showed some hope for a resurgence in the retail sector, it appears consumers are putting their cash and plastic back in their pockets.
The February Consumer Reports Retail Index, which reflects of January activity, is at pre-holiday levels. The index declined to 10.9 from January's 14.1, which provided a snap shot of December shopping -- a decline of 23 percent.
CR's "Next 30-Day Retail Index," reflecting planned purchasing for February, plummeted to 6.9 from 8.9 the prior month, making it well below pre-holiday levels and the lowest level tracked since the reading of 7.5 in August 2009.
The losses in the "Past 30-Day Retail Index," reflecting purchases made in January versus the prior month, and were driven by personal electronics (23.6 percent, down 11.1 percent pts.), major home electronics (13.9 percent, down 1.9 percent pts.), and major home appliances (6.3 percent, down 3.3 percent pts.).
The drop in the "Next 30-Day Retail Index" for February was driven by a decline in consumer intent to purchase major appliances (5.7 percent, down 2.1 percent pts.) and personal electronics (13.2 percent, down 3.9 percent pts.).
Retail purchases may be dropping, but it seems consumers are faced with less financial difficulties. The Consumer Reports Trouble Tracker showed real improvements, declining to 53.4 in February from 58.2 in January and its high of 68.7 in September. The top issue facing consumers in February is the inability to afford medical bills or medications at 14.7 percent, up from 12.7 percent in January. This issue is most common in the South (17.5 percent).
The CR Employment Index remains unchanged at 49.0 versus 49.3 in January, but there is a significant trend emerging. Over the past several months, the proportion of people reporting a job loss in the past 30-days steadily declined to 5.7 percent in February versus 7.8 percent in October; however those reporting starting a new job in the past 30 days has also declined to 3.8 percent in February from a recent high of 6.2 percent in September. Slow job creation remains a significant drag on the economy.
"The holiday season showed glimmers of hope for the economy, but it is clear through the retail index that consumers are now cutting back on spending," said Ed Farrell, director at the magazine's national research center. "While the economy is improving gradually for consumers as witnessed by improvements in the Trouble Tracker, which points to a decline in financial difficulties, the level of job creation needed to fuel a consumer recovery has not developed, though the tide of job losses has been stemmed."
As a result of the overall mixed picture, the Consumer Reports Sentiment Index was virtually unchanged in February (43.9) from January (44.1), while the Stress Index is now at 59.9 on par with January (59.0), but down from December (63.0). Regionally, the South and West were faring less well in February compared with January, while the Northeast and North Central were unchanged overall.
The CR Index is comprised of five key indices: the Sentiment Index, the Trouble Tracker Index, Stress Index, the Retail Index, and the Employment Index. Here are the key findings:
Sentiment Index
• The Sentiment Index held steady for February (43.9) relative to January (44.1). The most optimistic consumers were ages 18-34 (50.2) and households with incomes of $100,000+ (53.0). The most pessimistic consumers were in households with income less that $50,000 (40.3) and Americans 65 or older (40.2).
Trouble Tracker Index
• The Trouble Tracker Index has shown improvement over the past several months, falling to 53.4 in February from 58.2 in January. This is a continuation of a downward trend from September (68.7).
• Lower-income households, earning less than $50,000 a year, have been disproportionately affected. In the past 30 days 24.3 percent have been unable to afford medical bills or medications, 6.8 percent lost their job or were laid off and 14.6 percent missed a payment on a major bill (not mortgage).
Retail Index: Past 30-Day, Next 30-Day
• As expected the "Past 30-Day Retail Index" declined to 10.9 from January's 14.1, which reflected December holiday spending.
• The "Next 30-Day Retail Index" for February (6.9) was well below pre-holiday levels and below the lowest levels tracked to date in August 2009 (7.5).
• Among retail categories not included in the index (new car, used car, and new home), past 30-day purchases of new cars (2.5 percent) and used cars (5.8 percent), reflect January activity, and were up slightly from December, as were new homes (2.6 percent). February's next 30-day planned purchases are unchanged from the prior month for new cars, used cars and homes.
Stress Index
• The level of stress consumers feel they are under is down compared with prior months and the Stress Index is now at 59.9 on par with January (59.0) but down from December (63.0).
Employment Index
• The Employment Index stands at 49.0 for January, reflecting net job losses in the prior 30 days, and was on par with January (49.3). In the past 30 days, 5.7 percent reported losing their job versus 3.8 percent starting a new job.
Amid growing signs that the economy is getting back on its feet, personal finance experts are cautioning consumers to learn the lessons taught by these tough economic times, especially when it comes to debt.
