October preliminary Money Anxiety down to 69.2
October preliminary Money Anxiety Index at 69.2, and the September final at 69.3, are both below the 50-year average of the Money Anxiety Index at 70.7. This is the first time in the past 6 years that the Money Anxiety Index dipped below the 70.7 level. In the last 50 years, 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. On the eve of the Great Recession, the Money Anxiety Index stood at 58.6.
What is the Money Anxiety IndexTM?
The Money Anxiety Index measures various economic indicators and factors associated with consumers’ level of financial worry and stress. The Money Anxiety Index functions as an early-warning system to shifts in the economy, allowing financial advisors to react in time to changes in the economic cycle.
The Money Anxiety Index Is highly predictive. It predicted the arrival of the Great Recession over a year prior to the official declaration of the recession in December of 2007. In the graph below, you can see how consumers’ money anxiety is trending upwards starting in October of 2006.
Money Anxiety IndexTM in the Last 12 Months
The recent decline in the level of money anxiety among consumers is attributed mainly to the encouraging employment news. In September, employers added 248,000 non-farm jobs bringing the three-month average to 224,000. The improvement in employment also means a likely increase in consumption as a result of widening payroll. The timing of the projected increase in consumption in the 4th quarter is especially important to retailers that are gearing up for a stronger holiday season sales.
Money Anxiety IndexTM – historical perspective
The Money Anxiety Index consists of monthly measurement of the level of consumers’ financial anxiety for over 50 years. It spans from January 1959 to date. 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 50-year average is 70.7 (July 1980 = 100).
The Money Anxiety Index was developed using Structural Equation Modeling (SEM) with a large sample size of monthly economic indicators meeting, the required measures of fit.