The Pulse

Consumer Financial Confidence Ticks Upward

Jobs, debt level and spending all take a positive leap

New market research from the consumer credit company reveals a positive trend in consumer sentiment on financial wellness. Their 2022 Economic Index can be found here.

The personal finance website WalletHub today released the latest installment of its WalletHub Economic Index, which found that consumers view their financial outlook significantly more positively now than they did at the end of 2020.

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

  • Consumers felt more positive about every component of the WalletHub Economic Index in February 2022 compared to December 2020, with confidence levels rising by 3.6% or more for each component.
  • In February 2021, consumers started to gain confidence about whether they would have a job in the next six months. This increase has continued through February 2022.
  • In June 2021, consumers felt the most confident that their debt level would decrease over the following six months. Their confidence has plateaued through February 2022.
  • Consumers started feeling significantly better about their current employment opportunities in April 2021, with their confidence level up by over two percent compared to the previous month. This positive sentiment has continued to grow through February 2022, registering a 17% increase over December 2020.
  • Liberals had a larger overall increase in positive consumer sentiment than conservatives, jumping 6.4% since December 2020 compared to 6.2% for conservatives.

Expert Commentary

How have consumer spending habits changed during this last year?

“When the pandemic started a year or so ago consumers out of necessity tended to become more focused on their spending behavior. Whether it was the loss of jobs, isolating at home, or just not being able to find items on the store shelves, consumers gave more thought to how they were spending their money. The gradual movement toward online purchasing grew exponentially as access to brick-and-mortar stores became less available. Also, the convenience of shopping from a computer terminal gave homebound consumers something to do and places like Amazon reaped the benefits. As the pandemic stretched out and the number of COVID-19 cases seemed to be declining, individuals started to move ever so slightly back to shopping in person…However, the resurgence in the COVID-19 and the byproducts of the pandemic (supply chain problems, inflation) seems to have caused consumers back into a more focused and cautious state of mind.”
Bill Hauser, Ph.D. – Applied Sociologist; Associate Professor Emeritus, University of Akron

“Some reputed customer spending surveys reveal that stimulus checks and relaxation of pandemic restrictions have caused a boom in consumer spending in 2021. Particularly, online shopping saw a huge jump. Consumer spending went up by 15% compared to 2019. However, the effects of this were somewhat diminished by around 7% inflation in the last quarter of 2021. Many businesses changed their business model also. For example, many dine-in restaurants switched to take-home meals, phone/online ordering and saw a bump in sales. Travel-related businesses like cruise shops have not recovered despite vaccination rates going up because of the Delta and omicron variants. U.S. embassies remain closed down in many countries and this has adversely impacted hotels, airlines, and other international travel-related industries.”
Sampath Kumar – Professor, University of Wisconsin-Green Bay

Has the vaccination rollout and the reopening of businesses increased consumers’ economic confidence?

“Generally, increased vaccination rates are a positive thing for businesses. But delta and omicron variants have caused a dent in consumer confidence. Inflation is a big drag on consumer sentiment. Increasing costs of homeownership have made many customers feel that they can never afford a house in near future. Many cities are becoming unaffordable and we see a movement of people from major cities to relatively inexpensive cities in other states.”
Sampath Kumar – Professor, University of Wisconsin-Green Bay

When in the near future will it be a good time for consumers to start making large purchases?

“This is going to depend on the market and product availability. The cost of new and, especially, used cars have become astronomical. Vacations and trips are still governed by pandemic rules and regulations. Home repairs and remodeling are taking months due to shortages in parts and labor. Big box items are constrained by supply chain difficulties. Over the next year or two growth of large purchases will gradually occur if operational changes can occur. If so, consumer confidence in the system and not just economics will follow suit.”
Bill Hauser, Ph.D. – Applied Sociologist; Associate Professor Emeritus, University of Akron

“Appliances and automobiles can be bought once supply chain issues are fixed. That may take close to a few months to a year. Homeownership is becoming a major challenge. With impending interest rate increases, the best time to buy a home is now. Houses are only going to get expensive in the future.”
Sampath Kumar – Professor, University of Wisconsin-Green Bay