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Consumers regaining financial confidence due to better employment picture and lower gas prices, which are likely to boost holiday shopping season.

The November preliminary 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.  In November of 2007, the Money Anxiety Index stood at 58.6 climbing up to a high of 97.6 in the aftermath of the Great Recession, and gradually declining to its current level of 67.1.    

The improvement in the level of consumer financial anxiety 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 benefit from the continued improvement in consumers’ level of financial anxiety.  Research shows that when the level of money anxiety decreases, consumers tend to spend more.  Despite a soft consumption month in September, consumers are likely to increase the pace of spending in the last three months of the year due to significant improvement in the level of financial confidence as well as an increase in disposable income due to meaningful decrease in the price of gasoline.
 
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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