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Three major consumer confidence indices show highest financial confidence among consumers at levels not seen in the last few years.

The November Money Anxiety Index improved to 67.1, which is only 8.5 index points higher than its level seven years ago on the eve of the Great recession.  Similarly, the November Preliminary University of Michigan Consumer Sentiment Index came in at 89.4, up from the October Final of 86.9. This is the highest level the index exhibited since July 2007.  Additionally, the Gallup's Economic Confidence Index averaged -8 for the week ending Nov. 9. This is the highest weekly average for this index since June 30 of 2013.

The improvement in the level of consumer financial confidence comes amid continued positive news on employment.  The October employment figures show that the economy added 214,000 non-farm jobs, which brings the three-month employment average to a gain of 224,000 per month.  Moreover, the October employment report also contains encouraging news on the labor force participation rate rising to 62.8 percent meaning that more people are actively searching for jobs.

The approaching holiday-shopping season is likely to get a boost from the continued improvement in consumers’ level of financial confidence.  Research shows that when the level of money anxiety decreases, thus increasing the level of financial confidence, consumers tend to spend more money.  The fact that three major financial confidence indices point to highest levels of confidence in years suggests that consumers are likely to increase the pace of spending during the upcoming holiday-shopping season.
 
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 was developed by Dr. Dan Geller, who is an expert in behavioral finance, and the author of the book Money Anxiety.  The 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.   

 


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