Consumer confidence plummeting in wake of debt crisis


The Consumer Reports Index for August showed a weakening of overall consumer sentiment compared to the previous month, and in fact, it has to go all the way back to December 2009 to find a lower score. Meanwhile, the Consumer Reports Trouble Tracker made a troubling 10 point leap over July.

The CRI now stands at 43.4, which is the percentage of respondents who think they are better off now than they were a year ago. That’s down from 48.5 in July.

The Trouble Tracker, which measures difficulty handling health, mortgage and other financial obligations, rose all the way from 50.6 in July to 60.6 in August.

“The debt ceiling debate in Washington focused the consumer’s attention fully on the dire state of the economy, leaving many in a dispirited mood,” said Ed Farrell, director of the Consumer Reports National Research Center. “Americans are facing real financial difficulties due to weak employment, which is a key impediment to an economic recovery.  This is reflected in nearly every measure of the consumer’s experience.”

Farrell added, “The Consumer Reports Index shows no clear signs pointing to an economic recovery any time soon. Too many households are feeling financial pain and more jobs were lost than created. Unfortunately, the burden of this bad economy has fallen on the households that earn less than $50,000 a year. They’re the ones having trouble finding new jobs, paying bills and affording health care.”

The most optimistic groups include the 18-34 demographic, which posted a CRI of 54.4; and households with #$100K plus in annual income, which posted a CRI of 53.3.

Consumer Reports said there was one small bright spot in the August report, and it was an increase in retail activity. The index representing the percentage of consumers who made purchases in certain categories rose modestly from 10.2 to 12.0, mainly on the strength of acquisitions in the small appliance, major home electronics and personal electronics categories.

There was a small negative change in the Employment Index – it fell from 50.8 to 49.0. This means that slightly more people reported gaining jobs in July than losing them, and slightly more reported losing jobs than gaining them in August.

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