The Money Anxiety Index (www.moneyanxietyindex.com) shows signs of consumer concern over the financial and economic conflict with Russia in response to the events in the Ukraine. May’s Money Anxiety Index is nearly flat at 74.0 after a substantial improvement in April due to the positive news on the employment front.
The heightened level of money anxiety among consumers, resulting from the financial conflict with Russia, is already taking its toll on the US economy. Last week, the ten-year U.S. Treasury bonds dropped to 2.54 percent after yielding 3.03 percent at the end of 2013. The decline in long-term borrowing cost is a sign of weakening economy and an attempt to revive the recovery with cheaper money for borrowers. Another aspect of the uneasiness among consumers about the economy is the decrease in mortgage rates. Last week, the average 30-year fixed mortgage rate dropped to 4.17 after reaching a high of 4.54 in December of 2013.
Prior to the financial conflict with Russia, the prospects of accelerating economic recovery in the second half of this year was strong. However, a nearly flat 1st quarter GDP at 0.1 percent, and decreasing long-term interest rates, are increasing the level of money anxiety among consumers and even at the Fed. Last week, during her testimony before Congress, the Fed chairwoman, Janet Yellen, expressed concern about the softening of the economy and signaled that the Fed will keep rates lower for possibly longer than originally projected in order to reenergize the economic recovery.