Money Anxiety rises along Coronavirus economic concerns

SAN FRANCISCO, Calif. Feb. 7, 2020 - The Money Anxiety Index, which measures the financial behavior of consumers, increased 1.1 index points in January reflecting a growing fear from the economic impact of the Coronavirus on the U.S. and global economy.  In November of 2019, the Money Anxiety Index stood at 40.9, rising mildly to 41.0 in December, and rising noticeably to 42.1 in January.

 

The biggest threat to the U.S. economy from a prolonged exposure to the Coronavirus is an increase in money anxiety, which leads to a reduction in consumer spending.  Since personal consumption makes up 70% of GDP in the U.S., a collective drop of only 3% in personal consumption can push the U.S. into a recession because 70% of 3% would erase the current U.S. GDP of 2.1% 

 

If the Coronavirus will continue to spread and impact the U.S. economy in the next 45 days, the Fed will be forced to cut the funds rate to stimulate the economy and restore consumer confidence. In its January 28-29 meeting, the Fed decided to hold the funds rate at t its current range of 1.50%-1.75%.  However, since then, the impact on the U.S. economy has grown especially in the manufacturing sectors that relay heavily on supply chain management from China.

 

"Although the January jobs report released today shows a healthy increase of 225,000 non-farm jobs," says Dr. Dan Geller founder of Analyticom, "the real test will come in February, when the economic impact of the Coronavirus will be reflected in the employment situation.  If disruption in the travel sector and the delay in supply chain management will continue through February, employers will be forced to reduce expenses."  

 

Banks and credit unions are already lowering their deposit rates in anticipation for a Fed rate cut in March or April. In January, financial institutions lowered their deposit rates by an average of 1 bps nationally, and are projected to do the same in February and March according to a special forecast just released by Analyticom LLC - a behavioral economics and the producer of the Money Anxiety Index.

 

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.  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.

 

About Analyticom LLC

Analyticom LLC is a scientific research firm specializing in the application of behavioral economics in financial decisions.  Dr. Dan Geller, the founder of Analyticom LLC, is a pioneer in the field of behavioral economics in financial decisions, and is the co-author of the study Dynamics of Yield Gravity and the Money Anxiety Index published in the Journal of Applied Business and Economics.  Dr. Geller is a frequent speaker and media guest. He appeared on national TV and radio, such as CNBC and Fox, and delivered the keynote address at the American Banker's Symposium.  He is the author of the groundbreaking book on the impact of  Money Anxiety on the economy.

 

 

Media contact:

Dr. Dan Geller

415-891-3093

drgeller@analyticom.com