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June 2, 2005 — Consumers' confidence regarding their personal credit situation appears to be gaining momentum, as illustrated by gains in the latest Experian-Gallup Personal Credit Index. The index - now at 94 - is within 6 points of the initial 100 point reading set in March 2005, and is up 12 points from April's sharp decline. The latest rise marks the second straight month of heightened consumer confidence.
June's gains reflect growing optimism surrounding Americans' perceived financial outlook, especially as it pertains to their ability to pay their monthly bills, both now and in the future. High optimism in June is especially prevalent among:
- Males
- Americans over the age of 50
- Higher income respondents
Despite these gains, sentiment among lower income respondents (especially those earning less than $40,000 per year) and 30-49 year-olds lags behind the national average, signifying persistent worries over these groups' current credit situation and future financial outlook.
Despite the rise in consumer sentiment uncovered by the Experian-Gallup Personal Credit Index over the past few months, in reality, many Americans are feeling the "pinch" of rising prices:
- 41% of Americans assert that consumer prices are causing their family at least "somewhat serious" financial hardships, and
- 46% say they are experiencing financial hardship because of higher gas and oil prices.
Americans' Pain at the Pumps Extends to Wall Street
This consumer pessimism extends to the stock market as well. Over half (55%) of respondents feel that investing money in the stock market under today's conditions is a bad idea. In fact, 58% say that if they had $1000 to "invest" they would be more likely to put that money into a savings account than investing in the stock market, despite the paltry rates paid on most savings accounts. Not surprisingly, though 69% of Americans reported saving/investing in the past year, 21% report saving or investing less than they did in the year before (half say their savings and investment amounts have not changed).
2-in-5 Americans Don't Have a Financial Safety Net
Despite the seemingly high regard for savings accounts among most of those polled, a large number of Americans find themselves financially unprepared in the case of extended job loss or disability: 2-in-5 (41%) of those polled said they do not have an emergency fund of any type. Of those who do have an emergency fund, 31% would be completely "tapped out" within three months of a financial crisis.
Clearly, with the price of consumer goods and interest rates heading up, many Americans' ability to save and maintain a rainy day fund could be outpaced by the rate of inflation. As Americans may feel increasing pressure to lean on credit and other forms of debt to help finance their lifestyle, for some, the impact of rising rates and prices could spell additional headaches in the future.
Be sure to access next month's Experian-Gallup Personal Credit Index to stay on top of changes in Americans' credit perceptions and outlook.
About the Experian-Gallup Personal Credit Index
The Experian-Gallup Personal Credit Index is a monthly survey among a nationally representative sample of 1,000+ respondents, focusing on consumers' ever-changing attitudes and perceptions relating to their current credit situation and future expectations. Specific areas of inquiry include debt load, credit score, borrowing, and repayment ability. The survey's margin of error is +/- 3%.
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Experian-Gallup Personal Credit Index Rebounds in June
Experian-Gallup Personal Credit Index advances 8 points since May 2005:
- Reflects rise in future expectations — especially consumers' ability to pay monthly bills
- Yet, pessimism grows among those earning less than $40,000/year and 30-49 year-olds
46% of Americans Feeling "Pain at the Pumps"
Amount of Financial Hardship Caused by Recent Increases in Gas Prices
Typical "Rainy Day" Fund Lasts Less than 6 Months
Average Length of Time Before Respondents' Emergency Fund Would Run Out (Among 41% of Respondents With An Emergency Fund)
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