Consumers are conflicted between improving U.S. jobs market and declining equity markets, and are responding by slowing down spending.
The February preliminary Money Anxiety Index at 62.4 is the same as in the previous month indicating uncertainty and confusion among consumers about the economy. On one hand the U.S. jobs market is improving with an added 151,000 new nonfarm jobs in January contrasted by deteriorating global economy and equity markets, on the other hand.
Consumers are responding to conflicting economic signals by slowing down the pace of spending. In January, consumer spending was flat despite an increase of 0.3 percent in personal income and a 0.5 percent increase in average hourly earnings.
When confused and in doubt, consumers always default to their instinctive reaction to reduce spending and put more money aside for a rainy day. This is a normal reaction to economic and financial uncertainty rooted in our mechanism for self preservation.
If consumers will continue to lower spending due to economic uncertainty and confusion, the U.S. economy may join other economies with a slowdown in growth as consumer consumption makes up about 70 percent of Gross National Product of the U.S.
About The Money Anxiety Index
The Money Anxiety Index is an early-warning system to shifts in the economy. The index is highly predictive. It predicted the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.
The Money Anxiety Index measures the level of consumers' financial worry and stress based on their spending and savings levels. Historically, the Money Anxiety 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.
About Dr. Dan Geller
Dr. Dan Geller is a behavioral economist and the author of Money Anxiety. He pioneered the research on the link between money anxiety and financial behavior. Based on his research, Dr. Geller developed the Money Anxiety Index, which predicts economic trends.
Dr. Geller's research is featured in his book Money Anxiety - an insightful behavioral economics book that reveals how people make financial decisions. The book explains why we hate to lose more than we love to win and why we spend when safe and save when scared