Personal consumption, which makes up about 70 percent of Gross Domestic Product, has gradually increased throughout 2013 indicating more financially confident consumers. In the first quarter of 2013, personal consumption increased by 1.1 percent over the fourth quarter of 2012. In the second quarter of 2013, the increase in personal consumption jumped to 2.5 percent over the previous quarter, and in the third quarter of this year, the increase reached 4.1 percent according to data from the US Department of Commerce.
Another indication of improved level of consumer financial anxiety is the report released last week by The Commerce Department showing that durable goods orders jumped 3.5 percent in November as demand increased for a range of goods from aircraft to machinery and computers and electronic products. Non-defense orders, excluding aircraft, surged 4.5 percent making November’s figure the largest increase since January. The report suggested strength in manufacturing, which supports the observation made by the Money Anxiety Index that consumers are exhibiting less financial anxiety, thus creating greater demand for durable goods.
The link between consumers’ financial anxiety and their spending habits has been empirically demonstrated in the newly published book Money Anxiety (moneyanxiety.com), which shows the link between consumers’ level of financial anxiety and personal expenditure. The Money anxiety book also explains why the level of consumer financial anxiety impacts retail sales and bank savings by introducing a newly-developed segmentation method, Behavioralogy, which defines the financial behavior of consumers in six types of financial orientations: Mattress Money, Durable Diet, Power Play, Tiny Treats, Rate Race and Castle Craze.
“Any business can greatly improve its performance just by applying the principles of Money Anxiety” said Dan Geller, Ph.D. Behavioral Economist, “business and financial people, who ignore the impact money anxiety has on how and why consumers buy, are operating in the dark.”