Americans' financial outlook remains positive, according to a proprietary AICPA measure. In the second quarter of 2016, the Personal Financial Satisfaction Index (PFSi) reached its highest levels since the third quarter of 2007.
The PFSi stood at 17.1, up 3.4 points from last quarter and 1.2 points from the same time last year. It was buoyed by a 5-point rise in the AICPA CPA Outlook Index, a measure of CPA executives' sentiment toward their organizations' economic performance. The PFSi received a further boost from rises in job openings and home equity and a drop in loan delinquencies.
However, geopolitical instability may shake Americans' confidence in the economy further down the road, said Michael Eisenberg, CPA/PFS, a member of the AICPA's National CPA Financial Literacy Commission. Though the U.S. stock market rebounded quickly from the shock of the Brexit vote, Eisenberg observed in a news release that "many big financial companies may cut their hiring plans" in Brexit's wake. Furthermore, due to the Brexit vote's timing, the PFSi may not have captured its full impact.
The PFSi is calculated as the difference between two subindexes, the Personal Financial Pleasure Index and the Personal Financial Pain Index. The Pleasure Index consists of four equally weighted factors: the AICPA CPA Outlook Index, a measure of CPA executives' sentiment toward their companies' economic futures; the PFS 750 Market Index, a proprietary stock index; home equity per capita; and job openings. The Pain Index also comprises four equally weighted factors: inflation, personal taxes, loan delinquencies, and underemployment.
The Pleasure Index rose 2.1 points this quarter. Job openings and home equity both increased by 2 points. The Pain Index dropped 1.3 points this quarter, partly due to a 4-point drop in loan delinquencies. Inflation was down by 1 point this quarter, while personal taxes and underemployment remained static.