2023 WalletHub Economic Index

Consumers are substantially more confident about their financial outlook this month than they were at the same time last year

Consumers feel 18% more confident about their financial outlook this month than they did one year ago, according to the latest WalletHub Economic Index.

Key Stats

• Decreasing stress: Consumers’ stress levels regarding money are lower (-10.6%) in June 2023 compared to the same period last year.

• Increase in optimism: In June 2023, consumers’ optimism about whether their finances will improve in the next six months is noticeably higher (+12.1%) than it was last year.
• Rising interest in auto purchases: The share of consumers who expect to buy a car in the next six months rose by roughly 9% in June 2023 compared to last year.
• Real estate popularity rises: Home-buying interest among consumers increased by over 6% in June 2023 compared to last year.
• Strong debt-reduction confidence: The share of consumers who expect to have less debt after the next six months is more than 9% higher in June 2023 compared to last year.

Expert Commentary

Why is consumer confidence going up overall?

“We are still dealing with the aftermath of the 2020 Covid-19 pandemic and the related financial crisis. During that time, the government took unprecedented action, including trillions of dollars of consumer and small business stimulus. This averted most of the potential losses that would have otherwise occurred. However, it also created disequilibrium or imbalance in the market, leading to significant inflation and a few tremors of instability, such as the recent banking crisis. Despite these challenges, unemployment has remained very low, and minimum wage earners, in particular, are doing well in the market. This sustained economy has resulted in consistent consumer spending, which contributes to the high consumer confidence. While this situation presents a bit of a chicken and egg problem, consumers continue to see the positive economic impacts of their own spending, which fuels their confidence.”
Luke Erickson, Ph.D., AFC^® – Personal Finance Extension Specialist, University of Idaho

“We are at an interesting economic intersection with inflation and unemployment rates. However, I believe confidence is going up because a growing percentage of consumers are feeling more positive about the state of the economy and their personal financial circumstances. This optimism is inherent in the American character. While consumers may face personal financial challenges and lose confidence in the state of the country’s economy in the present, I feel that most consumers share a strong belief that tomorrow is another and better day.”
Paul Goebel CPFM^®, CPFC^® – Director, Student Money Management Center, University of North Texas

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

“The banking crisis added to consumer uncertainty. Uncertainty alters the spending habits of consumers, causing increased saving rates and decreased spending rates. The challenge with an economy that is driven by 70% consumer spending is when consumers stop or slow spending, the economy responds much like a garden would respond if the garden hose stopped flowing. The garden eventually stops producing vegetables. Businesses respond very much like consumers. Expansion projects are put on hold, for example, adding a pool, buying a new car, adding new employees, expanding a product line, etc. According to Job Creators Network, small businesses employ 60 million people. If the 31.5 million small business owners feel uncertain about the future, then they will not hire new employees or expand their business into new markets.”
Joseph Semprevivo, MA, MS – Professor, Indian River State College

“The FDIC stepped in and strongly supported consumers and businesses who were at risk of losing their funds during the recent bank collapses. This prevented significant losses for those customers and avoided widespread panic among customers of other banks across the country. The crisis was temporarily averted, but it did highlight systematic problems in the banking industry and the regulation of those industries that may still need to be addressed for long-term stability.”
Luke Erickson, Ph.D., AFC^® – Personal Finance Extension Specialist, University of Idaho

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

“The best personal finance plan is one that you started years ago and includes healthy habits such as saving, investing, budgeting, debt reduction, financial goal setting, and risk management. It is similar to preparing for a race. If you start preparing a week ahead of time, it will help a little. But what helps a lot more is already having a healthy lifestyle, including extensive training beforehand. Whether you are prepared or not for any looming financial crisis, the best thing you can do is establish healthy financial habits so that you are generally prepared and better ‘trained’ to withstand whatever may come your way.”
Luke Erickson, Ph.D., AFC^® – Personal Finance Extension Specialist, University of Idaho

“As a Real Estate Broker in Florida, I tell clients to hold off on purchasing a home until home prices or interest rates fall. Typically, home prices fall in Florida from July through October. Hold off as long as possible, which will allow the consumer to save money. Do not be afraid to stick to a purchase price, not a penny more, that you can afford. The purpose of purchasing a home is that the customer should own the home and not the other way around. Anytime a person is thinking about making a large purchase, they need to check their finances to make sure that they have enough money to cover all expenses for at least two years (mortgage/rent, insurance, food, utilities, medical insurance, etc.).”
Joseph Semprevivo, MA, MS – Professor, Indian River State College