|
May 2013
(p) |
April 2013 (R) |
Change from last month |
Same month last year |
Change from last year |
|
86.0 |
85.8 |
0.2 |
90.1 |
-4.1 |
*Preliminary (p) findings in mid month, and revised (R) at month end. (January 1975 = 100).
The Money Anxiety™ Index (MAI) measures various economic indicators and factors associated with consumers’ level of financial worry and stress. MAI differs from other indices of consumer confidence mainly because its measurement is objective rather than subjective. MAI measures how economic indicators are impacting consumers’ behavior (objective) rather than how consumers say they feel about the economy (subjective), which is the methodology used by survey-based consumer confidence indices.
Money Anxiety™ Index – historical prospective
The Money Anxiety™ Index (MAI) measured the level of consumers’ financial anxiety for over 50 years. It spans from January 1959 to date. MAI fluctuated from a high of 136.0 during the recession of the early 1980s, to a low of 40.3 in the mid 1960s. The 50-year average is 71.5 (January 1975 = 100). Figure 1 features the main turning points during the past 50 years.
Figure 1
Money Anxiety™ Index as a predictor to the last US recession
MAI clearly shows how consumers’ financial anxiety started to increase over a year prior to the official start of the last recession in December of 2007. MAI started climbing up in October of 2006, when it stood at 52.9, and increased to 62.6 at the official start of the last recession in December of 2007. The gradual increase in MAI, which started 14 months prior to the beginning of the last recession, indicates that consumers started feeling anxious about financial matters even though stated “confidence” was still high (Figure 2).
Figure 2
A comparison of MAI and the Consumer Sentiment Index produced by the University of Michigan (UMCSENT) shows that consumers’ financial anxiety started three months prior to the decrease in consumer confidence. The turning point in consumer’s confidence occurred in January of 2007, while the Money Anxiety Index turning point occurred in October of 2006. These findings indicate that consumers start reacting to changing economic conditions prior to the time they acknowledge that they are feeling less confidence about the economy (Figure 3).
Figure 3
Applicability of the Money Anxiety™ Index
Since MAI captures early signs of consumers’ financial anxiety, it can be used as a barometer to consumers’ behavior related to various economic activities. The level of consumers’ spending and savings is impacted by the level of financial anxiety. Therefore, the Money Anxiety™ Index can alert executives in different industries of pending changes in the spending and savings in advance of their occurrence. This advance indication provides an opportunity to make the necessary adjustments in pricing, products, and marketing to better accommodate the anticipated changes in consumer behavior.
