The preliminary December Money Anxiety Index stands at 56.7, which is the same level it was 10 years ago. The decrease in the level of money anxiety prior to the holiday season indicates that consumer spending will increase due to lower financial anxiety making this holiday season the best we have seen in the past 10 years.
What is the Money Anxiety Index?
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.
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Money Anxiety Index – 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.