SAN FRANCISCO–Just how real-time are the responses reported in many consumer surveys?
According to one analysis, people take financial action (spending or savings) 12 months before they report such activities in response to surveys.
That’s according to a cross-correlation analysis of the Money Anxiety Index, which monitors financial behavior, and the Michigan Consumer Sentiment, which is based on a written survey.
The cross-correlation analysis consisted of time series data of the Money Anxiety Index and the Michigan Consumer Sentiment from January 1978 to June 2018; a time span of over 40 years, the organizations said. During the last 40 years, there have been four economic cycles of recessions and recoveries, and the cross-correlation analysis shows that the average lag time between financial action and words was 12 months.
‘Significant Finding’
“This finding is very significant because it shows that people hold off on expressing their true feeling about the economy when responding to consumer confidence surveys such as the Michigan Consumer Sentiment,” said Dr. Dan Geller, who publishes the Money Anxiety Index. “Therefore, monitoring financial action, through the Money Anxiety Index, is much more timely and relevant in assessing consumer financial confidence and the economy.”
The Money Anxiety Index is an objective reflection of financial confidence. It measures what people actually do with their money rather than what they say in response to surveys. By contrast, other leading consumer confidence indices are based on a questionnaire that asks people what they think about the economy, Geller said.
According to Geller, the Money Anxiety Index is highly predictive. Prior to the Great Recession, the index showed how peoples' money anxiety was trending upwards starting in October of 2006; nearly 14 months before the official start of the Great Recession in December of 2007.
Geller noted the index went as high as 100.4 in the aftermath of the Great Recession, and has declined gradually to 45.4 this August. 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.