Conflicting media reports about the U.S. job market and unknown fallout from financial crises abroad are contributing to consumers’ level of financial worry and stress, according to a monthly pulse check of consumer confidence.
The Money Anxiety Index, a survey of consumers’ financial confidence based on their spending and savings patterns, shows only a slight improvement in the level of consumers’ financial anxiety.
The index decreased .01 to 64.8 for July, indicating cautiously more confident consumers.
According to the index, consumers are only cautiously more confident because of a dichotomy in reported economic news. Although the United States added 223,000 new jobs in June, many people are worried that financial crises in Greece and Puerto Rico may impact America’s economy.
The Money Anxiety Index – preliminary for July 2015.
Consumer confidence has been shaky for most of this year, according to the index. In January, the index increased 2.1 points, reflecting harsh winter conditions in many parts of the country. The index reported another increase in May due to a slightly negative first-quarter GDP, causing fear of economic slowdown.
“Consumers want to believe that things are getting better economically, but every time they do, something else comes up and temporarily shakes their confidence,” said Dr. Dan Geller, a behavioral finance scientist who developed the index.
The Money Anxiety Index functions as an early-warning system to shifts in the economy, allowing financial advisors to react in time to changes in the economic cycle.
Historically, the index fluctuated from a high of 135.3 during the recession of the early 1980s to a low of 38.7 in the mid-1960s. According to Geller, the index predicted the arrival of the 2008 financial crisis a year before its official declaration.
According to Geller, since the 2008 crisis, many consumers have been reluctant to spend money, shifting their assets to liquid accounts such as checking, savings and money-market accounts, “because it’s easier to withdraw the money in case of financial need.”
“Things are OK for most people,” he told the Pittsburgh Post-Gazette. “But financial confidence comes from going to bed at night knowing tomorrow will be a better day financially, meaning you’ll still have your job and be able to pay your bills and all the normal things people expect. It leads those who have a few dollars to squirrel them away.”
Perhaps illustrating how consumers may be confused by conflicting media reports, Fannie Mae reported last month that consumer attitudes about the housing market showed marked improvement in May.
According to the government-sponsored enterprise’s May 2015 National Housing Survey, the share of survey respondents reporting a significant increase in their household income climbed 4 percentage points to a near all-time high.
Among those surveyed, the share who believe now is a good time to sell a home continued its steady climb, reaching an all-time survey high in May — 6 percentage points higher than at the same time last year. Additionally, those saying they would prefer to buy rather than rent a home on their next move increased another three percentage points to 66 percent.
Inman Connect San Francisco is right around the corner — register now and save $200!
