Americans are upbeat as financial troubles decline and retail recovers from a five-month slide, according to the Consumer Reports Index, a measure of Americans' personal financial health. Supporting the improved consumer mood was a decline in financial difficulties, which reached their lowest level since first measured in April 2009.
The sharp rise in consumer sentiment, which jumped to its highest level since October 2008 (53.1 from 47.5 the previous month), saw gains among households earning less than $50,000 (+5.5 pts) as well as households earning $100,000 or more (+7.7 pts).
The Consumer Reports Index comprises five Index measures: Employment, Retail, Sentiment, Stress, and the Trouble Tracker.
The Trouble Tracker, a gauge of financial difficulties in the past 30 days, dropped from 46.5 to 41.8. The decline affected both lower and upper income households, but the financial difficulties faced by those in households earning less than $50,000 was three times as great as that of households earning $100,000 or more (58.9 versus 19.5).
"With more than half the country earning less than 50,000, any improvement among that group may have a significant impact on the economy. They still have some distance to climb, but these are positive signs," said Ed Farrell, director of Consumer Insight at the Consumer Reports National Research Center.
The employment measure is now above 50, meaning more people are getting a job than losing one (50.9 up from 49.7 last month), and driven by a 5.5 percent gain in job starts, the improvement reversed a three-month decline.
After a five-month slide, the index's past 30-day retail measure moved up to 9.9 from 8.9, but was virtually unchanged from a year ago (10.2). Planned purchasing over the next 30 days (8.6), which reflects intent to buy in July, was also up over last month (7.0), but lags last year at this time (7.7). Gains for the next-30-day retail measure were driven by both personal electronics purchases (17.7 percent, up from 15.0 percent a month earlier), and major home electronics purchases (10.9 percent, up from 7.1 percent).
"This positive start to the summer, with all measures moving in a favorable direction, indicates a better economic picture overall," said Farrell. "Over the past four years, we have seen that gains can prove to be fragile. Holding and building on these improvements will depend most on continued job growth to ensure a durable gain in the consumer outlook."
The Consumer Reports Index, a monthly telephone poll of a nationally representative sample of American adults, is conducted by the Consumer Reports National Research Center. A total of 1,013 interviews were completed between June 21 and 24. The margin of error is +/- 3.2 percentage points at a 95 percent confidence level.
Last month's Consumer Reports Index: New job starts at lowest level in nine months