Financial satisfaction stays high, but economic concerns remain

Americans’ personal financial satisfaction remains high, but it continued to edge lower in the third quarter of this year, according to the AICPA Personal Financial Satisfaction Index (PFSi), a quarterly economic indicator that was released Thursday. In the third quarter of 2019, the PFSi stood at 37.3, a 1.4-point (3.6%) drop from the previous quarter.

Despite three quarters of decline in the past year, however, the PFSi is still close to recent record highs. It is up 4.5 points (13.8%) from the third quarter of last year.

The drop in the PFSi may reflect worries about the overall economy. “Financial executives have been signaling future economic concerns for some time, and their concerns are at least being confirmed by a slowdown in growth,” said Leonard Wright, CPA/PFS, a member of the AICPA Personal Financial Specialist Credential Committee.

The PFSi is calculated as the difference between two subindexes, the Personal Financial Pleasure Index and the Personal Financial Pain Index. Each subindex consists of four equally weighted factors. For the Pleasure Index, the factors are real home equity per capita; job openings per capita; the PFS 750 Market Index, a proprietary stock index; and the AICPA’s CPA Outlook Index. For the Pain Index, the factors are underemployment, loan delinquencies, personal taxes, and inflation.

In the third quarter, the Pleasure Index stood at 72.6, down 1.7 points (2.2%) from the previous quarter. The largest contributor to the drop was the 2.8-point (5.5%) slip in the CPA Outlook Index, which tracks CPA executives’ expectations for the year ahead for their companies and the economy, and a 2.1-point (2.6%) decline in job openings. The PFS 750 Market Index fell 1.8 points (1.9%), while home equity remained constant.

Wright cautioned that there have been cases of false signals on expansion or contraction in the past. Given that uncertainty, he advised that it’s always a good idea to regularly review clients’ risk tolerance and their overall financial plans.

The Pain Index, at 35.4, edged down 0.3 points (0.8%) from the last quarter. Increases in underemployment (up 0.5 points or 1.7%) and inflation (up 1.3 points, 4.1%) were largely offset by reductions in taxes (down 1.6 points, 3.3%) and loan delinquencies (down 1.4 points, 4.7%).

More information about the PFSi is available at aicpa.org/PFSi.

— Anita Dennis is a New Jersey-based freelance writer. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, the JofA’s editorial director, at Kenneth.Tysiac@aicpa-cima.com.