August'sConsumer Reports Index, a measure of overall consumer sentiment, fell to its lowest level sinceDecember 2009and registered its sharpest drop in two years, as recent events inWashingtonabout the debt ceiling debate fixed attention on the weak economy.

"The debt ceiling debate inWashingtonfocused the consumer's attention fully on the dire state of the economy, leaving many in a dispirited mood," saidEd 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."

TheConsumer Reports Indexfell to 43.4, down sharply from 48.5 last month. The figure represents the percentage of people saying they were financially better off versus worse off than they were a year ago. TheConsumer Reports Trouble Tracker, a gauge of the breadth and depth of financial difficulties among American households, jumped 10 points to 60.6 in August, reflecting financial difficulties pertaining to health care and an inability to pay mortgages and other bills. TheEmployment Indexfell to its lowest level sinceMarch 2010and slid sharply, as more jobs were lost than created.

"TheConsumer Reports Indexshows no clear signs pointing to an economic recovery any time soon," Farrell said. "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$50,000a year. They're the ones having trouble finding new jobs, paying bills and affording health care."

No region of the country was spared. The North Central States, South and Western regions showed the greatest rise in financial difficulties reflected by theTrouble Tracker Index,and theEmployment Indexwas glum.

The retail indicators tracking recent and planned spending were the only measures to move in a positive direction in August, but they were rebounding from feeble levels in July.

TheConsumer Reports Indexreport, comprises five key indices: theSentiment Index, theTrouble Tracker Index, theStress Index, theRetail Index, and theEmployment Index. Here are the key findings:

Consumer Reports Sentiment Index: 43.4*

• Consumer Reports Sentiment Indexfell sharply from last month (48.5) and is below the 44.7 reported a year ago.
• The most optimistic consumers: age 18-34 at 54.4, and households with income of$100Kor more at 53.3. The most pessimistic consumers: households with income less than$50,000(38.9) and those who are age 65 and older (32.8). Each demographic group showed marked decreases in overall sentiment compared with July.

* TheConsumer ReportsSentiment Indexcaptures respondents' attitudes regarding their financial situation, asking them if they are feeling better or worse off than a year ago. When the index is greater than 50, more consumers are feeling positive about their situation. When it is below 50, more consumers are feeling worse. TheSentiment Indexcan vary from a high of 100 to a low of 0.

Consumer Reports Trouble Tracker Index: 60.6*

• TheConsumer Reports Trouble Tracker Indexincreased to 60.6, a 10-point jump from last month. The most common factors behind the increase were the inability to afford health care, reduced health-care coverage, and missed bill payments. TheTrouble Tracker Indexis higher than last August's 56.6.
• The financial difficulties that were on the rise in the past 30 days were led by the inability to afford medical bills or medications at 16.3%, an increase from 13.3% in July.
• The number of people who reported missing a mortgage payment was 3.4%, up from 1.8% in July and 2.4% inAugust 2010.
• Lower-income households, earning less than$50,000a year, have been disproportionately affected. In the past 30 days: 25.2% were unable to afford medical bills or medications; 15.8% missed payment on a major bill (not a mortgage); 12.9% lost or had reduced health-care coverage; and 8.2% had negative changes to credit-card terms.