SAN FRANCISCO—The Money Anxiety Index, which measures the level of financial confidence of consumers based on actual financial behavior, decreased 1.2 index points in February reflecting consumer resiliency despite the Coronavirus.
Lower money anxiety means higher financial confidence, noted Dan Geller behavioral economist and founder of Analyticom.
“Lower level of money anxiety translates to greater consumer spending, which is critical to the U.S. economy since nearly 70% of GDP is made up of consumer consumption,” said Geller. “The coronavirus may shift consumer spending priorities, such as from travel and events towards in-home spending, but as long as the level of money anxiety remains low, consumers will continue to spend.”
The real test of consumers' resiliency will come in April after the March figures will be released by the Government, according to Geller.
The latest employment figure released by the U.S. Department of Labor reflects only the first two weeks in February, which was before the stock market started tumbling and before the Fed cut the funds rate by 50 basis points.
"Next month we will also know if the emergency-Fed-rate cut did more good than harm to the economy," said Geller. "By cutting the funds rate in a panic, the Fed decreased the cost of borrowing, but the unintended consequence may be a much higher level of money anxiety."