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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.


 


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