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The idiom shop ‘til you drop is true but the drop is not from exhaustion, rather it is in financial confidence.

Financial confidence is a major driver in the shopping habit of consumers.  When financial confidence increases, consumers spend more money, and when their financial confidence drops, they spend less.  These are the findings from the latest study conducted by the Money Anxiety Index on the link between financial confidence and consumer consumption.

The study shows very strong correlation (.612) between the level of consumers’ financial anxiety and the level of consumer consumption.  Moreover, the study shows that changes in the financial anxiety of people explain 37 percent of the changes in the level of spending, which means that there is a very strong and significant causal relation between the two events.

Also, there is no lag time between changes in financial anxiety and spending.  Analysis shows high cross correlation (.597) between financial anxiety and consumer spending at the zero lag time, meaning that the two events occur within the same month. Thus, when consumers feel a change in their level of financial confidence, they react right away.  

The study consists of monthly data of Personal Consumption Expenditure (PCE) from January 2000 to December of 2014, published by the U.S. Department of Commerce, and monthly data of the Money Anxiety Index over the same time period.  
 
The Money Anxiety Index measures the level of consumers’ financial worry and stress based on their spending and savings pattern.  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.  The Money Anxiety Index is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   

Dr. Dan Geller is a behavioral finance scientist exploring the link between the level of financial anxiety and the savings and spending habits of consumers.  In his book, Money Anxiety, Dr. Geller uncovers the mystery of the financial mind, explaining why we hate to lose more than we love to win and why we spend when safe and save when scared.


 
 
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Change in financial confidence instantly impacts consumers’ decision to increase or decrease spending.

When consumers feel more financially confident, they increase consumption instantly, and when they are financially anxious, consumers reduce spending right away.  These are the findings from the latest study conducted by the Money Anxiety Index.

The study shows that in the past 15 years, consumer consumption increased in the same month that the Money Anxiety Index decreased, reflecting higher level of financial confidence.   Conversely, when the level of consumer financial confidence decreased, consumer consumption decreased as well with no lag time between the two events.

The study included monthly data of Personal Consumption Expenditure (PCE) published by the U.S. Department of Commerce, and monthly data of the Money Anxiety Index over the same time period.  The analysis shows that the lag time between the two events had the highest cross correlation (.597) at zero lag time, meaning within the same month of occurrence.
 
The Money Anxiety Index measures the level of consumers’ financial worry and stress based on their spending and savings pattern.  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.  The Money Anxiety Index is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   

Dr. Dan Geller is a behavioral finance scientist exploring the link between the level of financial anxiety and the savings and spending habits of consumers.  In his book, Money Anxiety, Dr. Geller uncovers the mystery of the financial mind, explaining why we hate to lose more than we love to win and why we spend when safe and save when scared.


 
 
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The Fed is likely to choose September for a rate hike because June is too soon and December is too late.

A relatively weak first quarter may convince the Fed to push the rate hike to September.  June is too soon because the second quarter results will not be available, and December is too late because it is over the critical holiday shopping season.  
The Fed Open Market Committee (FOMC) has three more meetings this year that are followed by a press conference – June, September and December.  Due to the importance of the initial Fed rate hike, it’s highly likely that the first move will occur during one of these meetings.

In the March 18 FOMC meeting, the votes were almost evenly split between an initial rate hike in June and September.  However, in the March FOMC meeting the committee did not have the March disappointing job report,  which means that more members of the committee will push for a September initial hike in order to better evaluate the employment situation.  A December hike is not very likely because it is too late in the year and is right over the holidays' season.

Lately, consumers have been exhibiting signs of financial nervousness about the economic recovery.  The April Money Anxiety Index is flat at 65.7, indicating that the level of financial anxiety among consumers is not improving as evident from their spending level.  February personal consumption expenditures increased by only 0.1 percent in nominal terms, which shows that consumers are holding back on spending.  

The Money Anxiety Index measures the level of consumers’ financial worry and stress based on their spending and savings pattern.  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.  The Money Anxiety Index is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   

Dr. Dan Geller is a financial behavior scientist exploring the link between the level of financial anxiety and the savings and spending habits of consumers.  In his book, Money Anxiety, Dr. Geller uncovers the mystery of the financial mind, explaining why we hate to lose more than we love to win and why we spend when safe and save when scared.


 
 
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After nearly 3 years of constant decline in the level of’ financial anxiety, consumers are exhibiting signs of nervousness about the worsening conflicts around the world.  The April preliminary Money Anxiety Index is flat at 65.7, indicating that the level of financial anxiety among consumers is not improving as it did in the past 3 years.

The worsening conflicts in the Middle East and the growing tension in Eastern Europe are creating economic uncertainty among U.S. consumers.  In response, consumers are lowering their personal consumptions, and businesses are starting to moderate their hiring in anticipation for slower demand for goods and services.  Despite an increase of 0.4 percent in personal income in February, personal consumption expenditures increased by only 0.1 percent in nominal terms in February, which shows that consumers were holding back on spending.  

Similarly, businesses are slowing down the pace of new hires.  In March of this year, only 126,000 non-farms jobs were added to the economy and the figures for January and February were scaled down, reducing the first quarter monthly average to 197,000 from previously-reported 276,000 monthly average.  The slowdown in new hires in the first quarter of 2015 is in reaction to lower level of consumer spending as a result of growing concerns among consumers about the economic impact of the escalation in global conflicts.

The Money Anxiety Index measures consumers’ level of financial worry and stress.  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.  The Money Anxiety Index is highly predictive.  It signaled the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007.   

Dr. Dan Geller is a financial behavior scientist exploring the link between the level of financial anxiety and the savings and spending habits of consumers.  In his book, Money Anxiety, Dr. Geller uncovers the mystery of the financial mind, explaining why we hate to lose more than we love to win and why we spend when safe and save when scared.