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7% Decrease in Consumer Sentiment in August 2023

CASHIERS WORK AT THE CHECKOUT LANES OF A WALMART STORE IN THE PORTER RANCH SECTION OF LOS ANGELES

the staff of the Ridgewood blog

Ridgewood NJ, Consumers feel over 7% less confident about their financial outlook this month than they did one year ago, according to the latest WalletHub Economic Index,


The WalletHub Economic Index is a monthly survey that evaluates economic prospects based on 10 components of consumer sentiment. These components revolve around how people feel about their finances, purchasing plans and employment opportunities.

Key Stats – Negative Outlook

  • Increasing stress: Consumers’ stress levels regarding money are higher (+7.1%) in August 2023 compared to the same period last year.
  • Large purchases are not a priority: In August 2023, consumers’ likelikood of making a large purchase in the next six months is about 7% lower than it was last year.
  • Decreasing financial optimism: In August 2023, consumers’ optimism about their finances recorded a moderate decrease from the previous month. At the same time, the level of optimism decreased by more than 6% in the past year.
  • Decreasing interest in auto purchases: The share of consumers who expect to buy a car in the next six months is roughly 6% lower in August 2023 compared to last year.
  • Weaker sense of job security: People’s confidence in having a job in the next six months is lower (-5.2%) in August 2023 compared to last year.

Key Stats – Positive Outlook

  • Real estate popularity rises: Home-buying interest among consumers increased by over 4% in August 2023 compared to last year.

The complete WalletHub Economic Index results can be found at https://wallethub.com/edu/wallethub-economic-index/91926.

Expert Commentary

With the ongoing uncertainties in this economy, what steps can individuals take to protect their personal finances?

“Household should make sure that they have savings in place to weather shocks, whether those are health or employment related. They should also insure themselves from large adverse events, to the greatest extent possible. People living in certain areas should also take care to insure environmental shocks, which have been increasing in frequency.”
Constantine Yannelis – Associate Professor, University of Chicago

“With the ongoing uncertainties in this economy, the steps individuals can take to protect their personal finances are the following, not in any specific order: 1. Diversify cash and investment holdings…While cash is king, individuals should still store their wealth in other forms than cash, such as stocks, bonds, and even cryptocurrencies, as long as they are comfortable with the level of risk associated with these cash alternatives. 2. Try to automate saving by depositing 10% of income into either a savings or investment account. Try not to take money out of this account unless there is an emergency. 3. Keep in mind that there is no free lunch in finance, meaning that if you want to get higher returns on your investments other than a cash savings account, you need to take on higher risks. Taking on more risks might lead to losing some or all of your money. So, if you decide to take on more risk on a particular investment, make sure it is not your life savings and that if you were to lose your principal amount, you can still pay your monthly bills.”
Joanne Guo, Ph.D. – Assistant Professor, St. Joseph’s University

In what ways has the recent banking crisis affected the financial decisions of households and businesses?

“Many households moved deposits, fearing another bank failure. Deposits were especially likely to move to the big four financial institutions. Much of this fear was misguided; most retail depositors are insured by the FDIC.”
Constantine Yannelis – Associate Professor, University of Chicago

“Not much. The headlines are getting attention, but the reality is that with FDIC insurance covering balances of $250k, a very small number of consumers have more than this. As a consequence, the ‘banking crisis’ is not affecting the consumer.”
John C. Lopez, CFP® – Senior Professor of Practice, University of Houston

One thought on “7% Decrease in Consumer Sentiment in August 2023

  1. Thanks Uncle Joe.

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