HPS Analysis

ESI: Confidence In Personal Finances Remains Resilient As Other Indicators Collapse

Economic sentiment decreased once again over the past two weeks, continuing a six-week stretch of decline and dropping below the previous all-time low by a 1.2 point margin. The HPS-CivicScience Economic Sentiment Index (ESI) fell to 33.3, its fifth record low in the last seven readings. Even so, confidence in personal finances rose, demonstrating the continued resilience of that indicator even as other gauges of confidence have fallen.

This week’s reading featured breaches of record-low consumer confidence nearly across the board. Four of the ESI’s five indicators hit lows not seen since the ESI’s inception in 2013: 

— Confidence in the overall U.S. economy fell 2.9 points to 28.7.

— Confidence in making a major purchase fell 2.2 points to 19.2.

— Confidence in finding a new job fell 1.5 points to 48.3.

— Confidence in purchasing a new home fell 1.2 points to 18.1.

The one indicator that bucked the trend this reading—and has shown resilience across the past twelve months as other indicators declined—is confidence in personal finances. For the entirety of 2022, confidence in personal finances has been the best performing indicator of confidence; this reading, it rose 1.5 points to 52.1

The chart above compares each indicator’s average value over the past 12 months (in blue) to that indicator’s value today (in red). Where indicators such as confidence in the overall economy and confidence in making a major purchase are substantially lower today compared to their 12-month average (lower by 10.2 and 9.8 points, respectively) confidence in personal finances is only 3.1 points off its average value for the year.

The findings align with those of the Fed annual Survey of Household Economics and Decisionmaking, which found 78% of adults said they were either “doing OK or living comfortably.” But just 24% rated the national economic conditions as good or excellent, down from 50% in 2019.

The effect of consumers holding on to their wallets was borne out in retail earnings releases last week. Target and Best Buy reported declines in quarterly sales and cut their annual outlooks as demand for categories like consumer electronics and home appliances remains low.

Employers have been under pressure to attract recent college graduates and maintain remote work flexibility. Despite this, just 20% of workers reported feeling that their job was secure, according to a recent ADP survey. 

The ESI’s three-day moving average began this two-week stretch at 34.8 on May 11. It hit its two-week high of 35.6 on Wednesday, May 18. The moving average hit a low of 30.7 on May 23, and recovered slightly to 32.1 to close out the session the following day.

The next release of the ESI will be Wednesday, June 8, 2022.

More Insights