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2014 Consumer Sentiment: Risk Aversion and Household Inequality

National economic forecasts and macro-level data can be misleading for financial institutions looking to measure consumer confidence. Analyzing the spending, investing, and borrowing intentions of your member base may be a more effective way to glean useful insights on consumer behavior.

Executive Summary

Perceptions have consequences. If markets and policymakers hang on each jag in indicators such as the Conference Board’s Consumer Confidence Index and the University of Michigan’s Index of Consumer Sentiment, it’s precisely because so much spending, growth, and economic momentum depend on consumers at the ground level. Feelings of confidence beget investments and risk taking. More importantly for credit unions, confidence leads to member borrowing—for homes, for cars, for the future.

What is the research about?

Filene partnered with Absolute Strategy Research (ASR) to analyze and publish an overview of consumer sentiment, especially as it relates to key behaviors like saving, borrowing, and housing. ASR has conducted a proprietary Survey of Household Finances for more than four years.

In what has so far been an atypical consumer recovery, we seek a better understanding of the driving forces behind households’ balance sheets, savings, and investment behavior. The survey of 1,000 adults aged 25–65 was carried out by leading market research company Taylor Nelson Sofres in early 2014. We believe the survey provides a unique and timely snapshot of US household behavior. This is not a survey of economists or professional forecasters; it’s a survey of everyday people like the members you serve.

What are the credit union implications?

The recovery is here but not here. Consumer sentiment, as measured by spending, investing, and borrowing intentions, is an important indicator, especially when growth is lumpy, spread unevenly by region or industry. 

The survey will not tell you what to do but will help you understand Americans’ changing feelings about saving and borrowing. In addition, here are some noteworthy insights that hold real implications for credit unions in the coming year:

  • Even after five years of US gross domestic product growth above 2%, 36% of respondents think the economy is in a recession or a depression
  • Respondents are shying away from debt: 54% plan to decrease their debt level over the coming year
  • Respondents are less worried about their financial situation now than they were a few years ago
  • 78% of respondents think economic policymakers are doing a bad job
  • The net balance of respondents who feel that their job is secure has risen to its highest level in two and a half years