SAN FRANCISCO–With considerable conversation and debate around whether the U.S. is headed for a recession and when, one new analysis suggests if a slowdown is coming, it’s not in the “immediate” future.
Noting an increase in money anxiety can cause a recession simply by reducing consumer consumption by only 5%, Dr. Dan Geller, creator of the Money Anxiety Index, said the Index was flat in July at 44.0, the same as June but slightly higher than May at 42.7 points.
“These figures are relatively low, and they do not point to an immediate recession,” Geller said. “The July Money Anxiety Index reading is consistent with the preliminary retail sales increase of 0.7% for the same month, indicating that consumer spending is still strong because of low money anxiety. However, constant hype about a recession could increase the level of money anxiety, which in return leads to reduction in spending.”
According to Geller, the theory of money anxiety, which is published in the Journal of Applied Business and Economics, demonstrates how an elevated level of money anxiety causes consumers to decrease their spending and shift more of their money to savings.
‘Instinctive Reaction’
“This is an instinctive reaction to perceived or real financial danger. People are simply hoarding money in case they lose their employment as a result of the recession,” said Geller.