U.S. Consumer Outlook Brighter, but Net Worth a 'Time Bomb'

consumer outlook
consumer outlook

Is there light at the end of the tunnel for U.S. consumers? Financial distress is generally at its lowest since fall 2008, according to figures in the new Consumer Distress Index produced by CredAbility, a nonprofit credit counseling organization. However, Americans' consumer net worth continues to suffer overall, with 47 states registering high levels of distress, including one, West Virginia, that's in a state of emergency.

Mark Cole, chief operating officer of CredAbility, says that net worth is a "ticking time bomb," as many Americans over the age of 50 have less time and opportunity to recover financially from the recession. The average jobless spell for Americans over the age of 55 lasts longer, and new jobs may pay less.

The organization measures consumer distress, or the financial picture for the average American family, on an index from 0 to 100. This quarter, Americans are making some modest gains, with the overall index score at 68.1, up from 67.2 in the fourth quarter of 2010. But any score below 70 indicates financial distress. The scale measures five categories: employment, housing, credit, household budget management, and net worth.


Several factors have raised the overall score: more full-time and part-time employment, better handling of household budgets, and smart use of credit, according to the report.

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One factor that could negatively affect household budgets in months to come is the price of gasoline. In the first three months of 2011, Americans spent $593 refueling their cars on average, an increase of 7.6% from the same period in 2010, according to the report.

For states in the West and Southeast, a weak housing market and high unemployment continue to make life difficult for the average household. States that have been especially hard hit by foreclosures, including Florida, Arizona and Nevada, are among the top five most distressed states.

North Dakota is the least distressed state, followed by South Dakota, Wyoming, Nebraska and Alaska. Cole says that these states have more stable industries and unemployment rates are lower. Strong community stability and low population sizes also have served to buffer consumers. "It's a different lifestyle," he says of states that are least distressed.

Catherine New is a reporter with the Huffington Post Media Group.