Arvest Consumer Sentiment Survey April Produced for Arvest Bank by a multi-university collaboration including: Center for Business and Economic Research Sam M. Walton College of Business University of Arkansas Director Kathy Deck Assistant Director Mervin Jebaraj Bureau of Economic Research Missouri State University Director David Mitchell Steven C. Agee Economic Research and Policy Institute Meinders School of Business Oklahoma City University Executive Director Russell Evans Associate Director Kyle Dean OU POLL The University of Oklahoma Director Amy Sue Goodin
Regional Results Reflecting national trends, the regional consumer sentiment, as measured by the Arvest Consumer Sentiment Index, increased slightly from September to. The index increased strongly in Arkansas, declined a bit in Missouri, and fell noticeably in Oklahoma. The differing levels of enthusiasm across the region reflected the various structures of the states economies, particularly in relation to their dependence on employment in the energy sector. The region s consumers remain less optimistic about conditions than their national counterparts, and the difference widened in early. Despite the mixed messages, both current conditions and expectations for the future were measured at rates indicative of economic expansion within the region. In particular, even respondents who indicated current tough times were generally positive about their expected financial situation a year from now, and noted that current buying conditions were attractive. All of these measures coincided with a low retail gasoline price environment, which is good for consumer s pocketbooks, but may inhibit hiring in energy and related sectors. - The Arvest Consumer Sentiment Index for the region that includes Arkansas, Missouri, and Oklahoma was 83.4 in, up slightly from 82.6 in September.This index value was lower than the national value reported by the University of Michigan for of 90.0. Arvest Consumer Sentiment Index, October,, September, Geography October September Region 71.4 72.6 83.2 82.6 83.4 Arkansas 67.4 68.1 79.1 77.8 84.9 Missouri 1 68.6 77.4 85.2 85.8 83.9 Oklahoma 76.4 72.6 84.8 85.0 81.3 University of Michigan Consumer Sentiment 82.5 86.9 93.0 87.2 90.0 - Across the region, families with incomes over $75,000 were significantly more confident about the current and future state of the economy than families with incomes under $75,000. Arvest Consumer Sentiment Index by Income Geography All Families Families with incomes under $75,000 Families with incomes over $75,000 Region 82.6 78.2 92.5 Arkansas 77.8 70.4 80.7 Missouri 85.8 76.1 93.2 Oklahoma 85.0 84.2 89.0 1 The Missouri numbers include data from the counties in the Kansas City metropolitan area that are in Kansas. ii
- A slight majority of respondents (51 percent) indicated that their personal financial situations were the same as a year ago. However, more respondents (26 percent) indicated that their financial situation was worse than indicated that their financial situation was better (22 percent). - More optimism was seen when respondents reported their expected financial situation in a year as indicated by an index of 126.0, which was up from 120.0 in September. - The survey respondents were more optimistic about the prospects for general business conditions over the next year, but less positive about the situation in the next five years. The 12 month ahead indicator rose from 92.0 to 96.0, while the five year ahead indicator was down from 99.0 to 94.0. - Respondents were more optimistic about buying conditions in the next six months as reflected by the index of 137.0, up from 128.0 in September. - Overall, respondents from the region remained far more negative about future economic prospects than they were about the current status of the economy. The current conditions index in was 90.3, unchanged from September, while the consumer expectations index was 78.9, up from 77.5 in September. Components of the Arvest Consumer Sentiment Index for the Region Date of Survey Personal Finances Business Conditions Buying Conditions Current (1) Expected (2) 12 months (3) 5 Years (4) Current Conditions Index Consumer Expectations Index (5) (1, 5) (2, 3, 4) 89.0 106.0 79.0 81.0 113.0 78.7 66.7 October 93.0 110.0 75.0 81.0 118.0 82.0 66.5 103.0 118.0 95.0 97.0 135.0 92.2 77.4 September 106.0 120.0 92.0 99.0 128.0 90.3 77.5 96.0 126.0 96.0 94.0 137.0 90.3 78.9 iii
Arkansas Results Consumer sentiment in Arkansas increased strongly from September to the latest reading. In accord with rapidly improving economic conditions in the state, Arkansans were more confident about their current and future finances but held mixed views about future economic conditions. While Arkansas residents experienced low gasoline prices at the pump, decreasing unemployment rates coupled with labor force growth, and slowly rising incomes during the time period, they continued to express concerns about the direction of the national and global economies. The reading is the first time since the inception of the Arvest Consumer Sentiment Index that Arkansas has had better consumer sentiment readings than the overall region, Missouri, and Oklahoma. In, the Arvest Consumer Sentiment Index for Arkansas was 84.9, up from 77.8 in September, and higher than the regional reading of 83.4. - In Arkansas, as in the region, families with incomes over $75,000 were somewhat more confident about the current and future state of the economy than families with incomes under $75,000. Arvest Consumer Sentiment Index for Arkansas by Income Date of Survey All Families Families with incomes under $75,000 Families with incomes over $75,000 67.4 62.6 82.2 October 68.1 61.8 71.9 79.1 71.4 86.8 September 77.8 70.4 80.7 84.9 83.1 86.3 - More than half of Arkansas respondents (54 percent) indicated that their personal financial situations were the same as a year ago. Additionally, a larger percentage of respondents (25 percent) indicated that their financial situation was worse than indicated that their financial situation was better (21 percent). - Increasing optimism was seen when respondents reported their expected financial situation in a year as indicated by an index of 128.0, up from 111.0 in September. - The survey respondents were more optimistic both about the prospects for general business conditions over the next year and about prospects over the next five years than in September. - Most notably, respondents reported significantly increased optimism about buying conditions in the next six months as reflected by the index of 140.0, up from 120.0 in September. - Overall, respondents from Arkansas turned quite positive about future economic prospects, but were muted about the current state of the economy. The current conditions index in was 91.5, up from 85.6 in September, while the consumer expectations index was 80.7, up substantially from 72.8 in September. iv
Components of Arvest Consumer Sentiment Index for Arkansas Date of Survey October September Personal Finances Current (1) Expected (2) Business Conditions 12 months (3) 5 Years (4) Buying Conditions Current Conditions Index Consumer Expectations Index (5) (1, 5) (2, 3, 4) 87.0 109.0 69.0 73.0 105.0 74.7 62.7 86.0 105.0 70.0 75.0 110.0 76.3 62.9 101.0 115.0 83.0 91.0 131.0 89.6 72.4 100.0 111.0 90.0 89.0 120.0 85.6 72.8 96.0 128.9 101.1 96.0 140.0 91.5 80.7 - The improved readings on the year ahead expected economic situation component of consumer sentiment in Arkansas were consistent with the positive economic data that have been reported. Even as unemployment rates were improving, the labor force was growing again and personal income growth was noticeable. v
Missouri Results The latest Arvest Consumer Sentiment Survey results for Missouri show that consumers within Missouri are slightly more pessimistic about the economy then they were at the date of the last consumer sentiment reading; however, when this reading is taken in a larger context, it is not as disturbing. There are now enough data points to begin discussing trends. Since of 20014, consumer confidence has grown but has essentially plateaued. Interesting enough, this plateauing is being driven by different changes in consumer confidence among the two income groups. Consumers with incomes below $75,000 are growing more confident while higher income consumers have seen a slight decrease in their confidence from the last reading. Neither one of these changes in consumer confidence since the last reading are not large; however, what is more disturbing is the trend. In of confidence among higher income consumers peaked at 98.3 has been slowly declining since then while, with the exception of September, confidence has been growing among families with incomes less than $75,000. This trend has led to convergence between these two groups. In of, there was over a 20 point gap between the two groups, today this gap is only 0.7 points. - In, the Arvest Consumer Sentiment Index for Missouri was 83.9, down from 85.8 in September, and slightly higher than the regional reading of 83.4. - In Missouri, as in the region, families with incomes over $75,000 were more confident about the current and future state of the economy than families with incomes under $75,000, although the difference was slight in. Arvest Consumer Sentiment Index for Missouri by Income Date of Survey All Families Families with incomes under $75,000 Families with incomes over $75,000 68.6 59.2 79.8 October 77.4 65.3 87.3 85.2 76.9 98.3 September 85.8 76.1 93.2 83.9 85.8 86.5 - Half of Missouri respondents indicated that their personal financial situations were the same as a year ago. However, more respondents (26 percent) indicated that their financial situation was worse than indicated that their financial situation was better (23 percent). - More optimism was seen when respondents reported their expected financial situation in a year as indicated by an index of 127.0, up from the September level of 121.0 - The survey respondents were more positive about the prospects for general business conditions over the next year but less positive about the prospects for general business conditions over the next five years. - Respondents remained optimistic about buying conditions in the next six months as reflected by the index of 139.0, unchanged from September. - Overall, respondents from Missouri were more negative about future economic prospects than about the current state of the economy, and the gap widened. The current conditions index in was 91.2 down from 96.1 in September, while the consumer expectations index was 79.3, up slightly from 79.2 in September. vi
Components of the Arvest Consumer Sentiment Index for Missouri Date of Survey Personal Finances Current (1) Expected (2) Business Conditions 12 months (3) 5 Years (4) Buying Conditions Current Conditions Index Consumer Expectations Index (5) (1, 5) (2, 3, 4) 85.0 92.0 79.0 79.0 114.0 77.6 62.9 October 93.0 110.0 86.0 97.0 124.0 84.0 73.1 101.0 119.0 101.0 106.0 135.0 91.2 81.3 September 109.0 121.0 92.0 104.0 139.0 96.1 79.2 97.0 127.0 94.0 97.0 139.0 91.2 79.3 vii
Oklahoma Results The reality of both the severity and duration of the current commodity price downturn and its implications for the Oklahoma economy are reflected in the Oklahoma Consumer Sentiment reading of 81.3, down significantly from the last reading in the fall of and below the regional average for the first time since the inception of the multi-state Arvest Consumer Sentiment Index. The drop in sentiment reflects both falling confidence in current conditions and developing expectations that future conditions may bring more of the same. The only area showing improving sentiment from last fall was the recognition that now was a good time to make a major purchase if only Oklahomans had the income confidence to do so! - In, the Arvest Consumer Sentiment Index for Oklahoma was 81.3, down from 85.0 in September, and lower than the regional reading of 83.4 for the first time since the inception of the Arvest Consumer Sentiment Index. - In Oklahoma, as in the region, families with incomes over $75,000 were more confident about the current and future state of the economy than families with incomes under $75,000. Arvest Consumer Sentiment Index for Oklahoma by Income Date of Survey All Families Families with incomes under $75,000 Families with incomes over $75,000 76.4 66.9 81.8 October 72.6 64.7 78.7 84.8 79.7 86.4 September 85.0 84.2 89.0 81.3 77.7 85.6 - Half of Oklahoma respondents indicated that their personal financial situations were the same as a year ago. More respondents (27 percent) indicated that their financial situation was worse than indicated that their financial situation was worse (22 percent). - Less optimism was seen when respondents reported their expected financial situation in a year as indicated by an index of 125.0, down from 131.0 in September. - The survey respondents were unchanged about the prospects for general business conditions over the next year, and significantly less positive about the outlook during the next five years than in September. - Respondents were more optimistic about buying conditions in the next six months as reflected by the index of 133.0, up from 129.0 in September. - Overall, respondents from Oklahoma were more negative about future economic prospects than about the current state of the economy, although both measures fell during the period. The current conditions index in was 88.2, down from 91.1 in September, while the consumer expectations index was 76.9, down from 81.1 in September. viii
Components of Arvest Consumer Sentiment Index for Oklahoma Date of Survey Personal Finances Current (1) Expected (2) Business Conditions 12 months (3) 5 Years (4) Buying Conditions Current Conditions Index Consumer Expectations Index (5) (1, 5) (2, 3, 4) 94.0 115.0 87.0 88.0 118.0 82.2 72.6 October 101.0 115.0 69.0 73.0 120.0 85.8 64.2 109.0 121.0 99.0 92.0 138.0 95.5 77.8 September 107.0 131.0 93.0 102.0 129.0 91.1 81.1 95.0 125.0 93.0 91.0 133.0 88.2 76.9 - The Oklahoma Consumer Sentiment index fell sharply with the reading, finally reflecting a reluctant acceptance that the downturn in commodity prices will continue to exert a considerable influence over the state s economic future. As usual, Oklahomans remain even more concerned with future conditions. ix
Contents Regional Results... ii Arkansas Results... iv Missouri Results... vi Oklahoma Results... viii List of Tables... xi List of Figures...xiii Introduction... 1 Methodology... 1 Macroeconomic Trends... 2 University of Michigan Survey Results... 8 Regional Results... 9 Consumer Sentiment... 10 Regional Household Purchases... 14 Regional Consumer Debt, Credit Conditions and Savings... 15 Arkansas... 18 Current Economic Situation... 18 Consumer Sentiment... 21 Arkansas Household Purchases... 26 Arkansas Consumer Debt, Credit Conditions and Savings... 27 Missouri... 30 Consumer Sentiment... 40 Missouri Household Purchases... 45 Missouri Consumer Debt, Credit Conditions and Savings... 46 Oklahoma... 49 Consumer Sentiment... 52 Oklahoma Household Purchases... 57 Oklahoma Consumer Debt, Credit Conditions and Savings... 59 Methods and Procedures... 61 TABLE OF CONTENTS... ii x
List of Tables Table 1: The University of Michigan Index of Consumer Sentiment... 8 Table 2: Arvest Consumer Sentiment Index for the Region by Income... 10 Table 3: Consumer Sentiment Index by Age Subgroup... 10 Table 4: Consumer Sentiment Index by Educational Attainment... 10 Table 5: Consumer Sentiment Index by Presence of Children in the Home... 11 Table 6: Consumer Sentiment Index by Employment Status... 11 Table 7: Consumer Sentiment Index by Homeownership Status... 11 Table 8: Components of Consumer Sentiment Index... 12 Table 9: Current Financial Situation Compared with a Year Ago... 12 Table 10: Expected Change in Financial Situation in a Year... 13 Table 11: Expected Change in Business Conditions in a Year... 13 Table 12: Expected Change in Economic Conditions in 5 Years... 13 Table 13: Buying Conditions... 14 Table 14: Recent Major Household Purchases... 14 Table 15: Major Household Purchase Plans... 15 Table 16: Major Household Purchase Plans... 15 Table 17: Percentage of Respondents with Consumer Debt... 15 Table 18: Percentage of Respondents who Anticipate Acquiring Credit... 16 Table 19: Percentage of Respondents who Anticipate Difficulty Acquiring Credit... 16 Table 20: Current Household Savings Rates... 17 Table 21: Planned Household Savings Rates... 17 Table 22: Arvest Consumer Sentiment Index by Income... 22 Table 23: Index of Consumer Sentiment by Age Subgroup... 22 Table 24: Consumer Sentiment Index by Educational Attainment... 22 Table 25: Consumer Sentiment Index by Presence of Children in the Home... 23 Table 26: Consumer Sentiment Index by Employment Status... 23 Table 27: Consumer Sentiment Index by Homeownership Status... 23 Table 28: Components of Consumer Sentiment Index... 24 Table 29: Current Financial Situation Compared with a Year Ago... 24 Table 30: Expected Change in Financial Situation in a Year... 25 Table 31: Expected Change in Business Conditions in a Year... 25 Table 32: Expected Change in Economic Conditions in 5 Years... 25 Table 33: Buying Conditions... 26 Table 34: Recent Major Household Purchases... 26 Table 35: Major Household Purchase Plans... 27 Table 36: Major Household Purchase Plans... 27 Table 37: Percentage of Respondents with Consumer Debt... 27 Table 38: Percentage of Respondents who Anticipate Acquiring Credit... 28 Table 39: Percentage of Respondents who Anticipate Difficulty Acquiring Credit... 28 Table 40: Current Household Savings Rates... 29 Table 41: Planned Household Savings Rates... 29 Table 42: Arvest Consumer Sentiment Index by Income... 40 Table 43: Consumer Sentiment Index by Age Subgroup... 41 xi
Table 44: Consumer Sentiment Index by Educational Attainment... 41 Table 45: Consumer Sentiment Index by Presence of Children in the Home... 41 Table 46: Consumer Sentiment Index by Employment Status... 42 Table 47: Consumer Sentiment Index by Homeownership Status... 42 Table 48: Components of Consumer Sentiment Index... 43 Table 49: Current Financial Situation Compared with a Year Ago... 43 Table 50: Expected Change in Financial Situation in a Year... 43 Table 51: Expected Change in Business Conditions in a Year... 44 Table 52: Expected Change in Economic Conditions in 5 Years... 44 Table 53: Buying Conditions... 45 Table 54: Recent Major Household Purchases... 45 Table 55: Major Household Purchase Plans... 46 Table 56: Major Household Purchase Plans... 46 Table 57: Percentage of Respondents with Consumer Debt... 46 Table 58: Percentage of Respondents who Anticipate Acquiring Credit... 47 Table 59: Percentage of Respondents who Anticipate Difficulty Acquiring Credit... 47 Table 60: Current Household Savings Rates... 48 Table 61: Planned Household Savings Rates... 48 Table 62: Arvest Consumer Sentiment Index by Income... 53 Table 63: Consumer Sentiment Index by Income... 53 Table 64: Consumer Sentiment Index by Educational Attainment... 54 Table 65: Consumer Sentiment Index by Presence of Children in the Home... 54 Table 66: Consumer Sentiment Index by Employment Status... 54 Table 67: Consumer Sentiment Index by Homeownership Status... 55 Table 68: Components of Consumer Sentiment Index... 55 Table 69: Current Financial Situation Compared with a Year Ago... 56 Table 70: Expected Change in Financial Situation in a Year... 56 Table 71: Expected Change in Business Conditions in a Year... 56 Table 72: Expected Change in Economic Conditions in 5 Years... 57 Table 73: Buying Conditions... 57 Table 74: Recent Major Household Purchases... 58 Table 75: Major Household Purchase Plans... 58 Table 76: Major Household Purchase Plans... 58 Table 77: Percentage of Respondents with Consumer Debt... 59 Table 78: Percentage of Respondents who Anticipate Acquiring Credit... 59 Table 79: Percentage of Respondents who Anticipate Difficulty Acquiring Credit... 59 Table 80: Current Household Savings Rates... 60 Table 81: Planned Household Savings Rates... 60 xii
List of Figures Figure 1: Real U.S. GDP Growth... 2 Figure 2: U.S. Non-Farm Employment... 3 Figure 3: Change in U.S. Employment by Sector... 3 Figure 4: U.S. Labor Force Growth... 4 Figure 5: U.S. Unemployment Rate... 5 Figure 6: U.S. Real Disposable PCPI Growth... 5 Figure 7: Productivity... 6 Figure 8: Personal Savings Rate... 6 Figure 9: U.S. Retail Sales Growth... 7 Figure 10: Selected Interest Rates... 7 Figure 11: University of Michigan Index of Consumer Sentiment... 8 Figure 12: University of Michigan Index of Current Conditions and Index of Consumer Expectations... 9 Figure 13: Arkansas Coincident Index... 18 Figure 14: Arkansas Unemployment Rate... 19 Figure 15: Arkansas Labor Force Growth... 19 Figure 16: Arkansas Non-Farm Employment... 20 Figure 17: Arkansas Employment by Sector... 20 Figure 18: Arkansas Personal Income Index... 21 Figure 19: MoKan Unemployment Rate (SA)... 30 Figure 20: MoKan Unemployment (SA)... 31 Figure 21: MoKan Employment (SA)... 32 Figure 22: Percentage Change in Employment year over year... 33 Figure 23: Change in Employment by Sector (thousands of jobs)... 33 Figure 24: Employment Index (Employment in Jan 2000=100)... 34 Figure 25: MoKan Labor Force (SA)... 35 Figure 26: Missouri Real Personal Income (thousands of Dollars)... 36 Figure 27: Kansas Real Personal Income (Thousands of Dollars)... 36 Figure 28: Index of Real Personal Income (1990 Q1=100)... 37 Figure 29: Percent change in nominal wages... 38 Figure 29: Missouri Consumer Confidence Index by income... 39 Figure 31: Oklahoma Energy Index and State Private Employment... 49 Figure 32: Oklahoma Unemployment Rates, Selected Cities... 50 Figure 33: Regional Nonfarm Employment... 51 Figure 34: Oklahoma Employment, Top Growth Sectors... 52 xiii
Introduction Consumer sentiment is an important gauge of how people feel about the current and expected economic situation. The measure combines information about how personal financial situations have changed or are expected to change with perceptions of how the overall economic climate is likely to develop. Personal consumption expenditures accounted for 68.5 percent of gross domestic product in the United States in the fourth quarter of, so understanding the degree of optimism that consumers have is vital to understanding how the economy will function. Because the concept of consumer sentiment is so essential, a wide variety of organizations attempt to measure the statistic. The University of Michigan has produced its widely followed consumer sentiment index monthly since 1978. Other well-regarded measures come from the Conference Board and Bloomberg. This study, the Arvest Consumer Sentiment Survey, adds to the economic literature regarding consumer sentiment by focusing on the region including Arkansas, Missouri, and Oklahoma. The survey includes consumer sentiment questions that mirror those of the University of Michigan Index of Consumer Sentiment, as well as questions about current and expected consumer debt, personal savings rates, and purchase intentions. The Arvest Consumer Sentiment Survey is administered twice a year, with the previous results from,, and this set of results from. While the baseline levels of consumer sentiment are instructive as they relate to the national measure, more important is how consumer sentiment changes in the region relative to the United States. Because the index is made up of variables that look at current and expected conditions, the individual components give insight as to why consumers make the purchase and savings decisions that they make and how expectations about the economy may become selffulfilling. Methodology The Arvest Consumer Sentiment Index follows the methodology of the University of Michigan Index of Consumer Sentiment, by using five key questions to evaluate consumer expectations and current economic conditions. The percent of respondents giving favorable minus the percent giving unfavorable replies are rounded to the nearest whole number and added to 100. These numbers are divided by the weighting from the University of Michigan survey (6.7558) and added to 2 (for consistency with the original index). The formula for calculation is: Index of Consumer Sentiment = XX 1+ XX 2 +XX 3 +XX 4 +XX 5 6.7558 + 2.0 There are also two sub-indexes that can be calculated: the Index of Current Economic Conditions and the Index of Consumer Expectations. They are calculated as: Index of Current Economic Conditions = XX 1+XX 5 2.6424 + 2.0 Index of Consumer Expectations = XX 2+XX 3 +XX 4 4.1134 + 2.0 The Arvest Consumer Sentiment Survey adds additional questions to provide some context for these numbers. These questions involve purchasing plans for major household items, the current status and 1
types of consumer debt outstanding, plans for taking on additional consumer debt, perceptions of credit conditions, current savings habits, planned savings behavior, and a set of demographic questions. When calculating the regional and overall state level Consumer Sentiment Index values, the raw survey results were gender and age weighted to provide a more population-representative measure. This weighting was not possible for the sub-indexes for the states, as sample cell sizes were too small. The measures that are reported at that level are unweighted. Macroeconomic Trends 2 The most recent macroeconomic indicators in the United States have been mainly positive. The final estimate of GDP growth for the fourth quarter of showed that economic activity continued to grow, although not at the pace desired by most economy-watchers. On an inflation adjusted basis, GDP rose by 1.4 percent. The increase in real GDP in the fourth quarter reflected positive contributions from PCE, residential fixed investment, and federal government spending that were partly offset by negative contributions from nonresidential fixed investment, exports, private inventory investment, and state and local government spending. Imports, which are a subtraction in the calculation of GDP, decreased. 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0% Real U.S. Gross Domestic Product Growth Rate 2000.Q1 2000.Q3 2001.Q1 2001.Q3 2002.Q1 2002.Q3 2003.Q1 2003.Q3 2004.Q1 2004.Q3 2005.Q1 2005.Q3 2006.Q1 2006.Q3 2007.Q1 2007.Q3 2008.Q1 2008.Q3 2009.Q1 2009.Q3 2010.Q1 2010.Q3 2011.Q1 2011.Q3 2012.Q1 2012.Q3 2013.Q1 2013.Q3.Q1.Q3.Q1.Q3 Source: U.S. Commerce Department, Bureau of Economic Analysis Figure 1: Real U.S. GDP Growth Another indicator of the strength of the economy came from continued positive nonfarm employment data. The annual growth rate ranged between 2.2 and 1.9 percent during the fourth quarter of and first quarter of, meaning that the economy hit new record employment levels in December and has only experienced normal seasonal downturns since then. The monthly changes in the levels of U.S. 2 This analysis has been provided by the University of Arkansas and may not reflect the opinions, interpretations, and forecasts from all parties. For additional information or perspectives on national conditions, contact Kathy Deck at the University of Arkansas, Russell Evans at Oklahoma City University, and David Mitchell at Missouri State University. 2
nonfarm employment and have only moderated slightly throughout and into, but are still at attractive levels. The job growth has also been quite broadly-based across industries; only mining and logging (the sector where the hard-hit energy industry is most prevalent) and manufacturing (also related to the declines in the industry sector) had less employment in than in. 150,000 U.S. Non-Farm Employment 145,000 140,000 135,000 130,000 125,000 120,000 115,000 Jan-00 Jan-01 Jan-02 Jan-03 Thousands Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Bureau of Labor Statistics Figure 2: U.S. Non-Farm Employment Figure 3: Change in U.S. Employment by Sector 3
The nonfarm employment statistics come from the Current Employment Statistics program: a survey of employers. Additionally, the Bureau of Labor Statistics conducts a survey of households called the Current Population Survey to calculate the size of the labor force and unemployment rates. Since the Great Recession, the U.S. labor force has been growing more slowly than in the prior decades. This is a result of a combination of factors: the aging of the population and retirement of the first baby boomers, the rise in college-going rates, slowed immigration, and the increase in discouraged workers. As a result of slowing labor force growth and new employment opportunities, the unemployment rate has declined and is back in a range that was considered normal before the onset of the Great Recession. 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% -1.0% Labor Force, Year Over Year Percent Change -1.5% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Bureau of Labor Statistics Figure 4: U.S. Labor Force Growth 4
U.S. Unemployment Rate, Seasonally Adjusted 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Bureau of Labor Statistics Figure 5: U.S. Unemployment Rate Even as unemployment rates have declined substantially, the improved labor market has not translated into increased real income for the average person. The growth rate in inflation-adjusted per capita income remains muted; the average consumer s income is just barely keeping up with very modestly increasing prices. Also constraining incomes was the fact that productivity growth (output per hour) was nearly zero in the second half of. 6.0% U.S. Real Disposable Per Capita Personal Income, Year Over Year Percent Change, Chained 2009 Dollars 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: U.S. Bureau of Economic Analysis Figure 6: U.S. Real Disposable PCPI Growth 5
Figure 7: Productivity The personal savings rate, that is, the percentage of income that is not spent each month, hovered around 5.0 percent at the end of and into the beginning of. The personal savings rate has returned to levels seen during the 2001 recession time period and has not declined to the very low rates seen during the housing boom from 2005 to 2008. 12.0 Personal Savings Rate Seasonally Adjusted Annual Rate 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: U.S. Bureau of Economic Analysis Figure 8: Personal Savings Rate During the first few months of, the annual rate of increase in retail sales ticked up slightly, but remained below the 5 percent pace that was often seen before the Great Recession. 6
15.0% U.S. Retail Sales, Year Over Year Growth Rates 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: U.S. Census Bureau Figure 9: U.S. Retail Sales Growth Both the Federal Reserve-set federal funds rate and the market-based 30 year mortgage interest rates continue to be near historically low levels. The federal funds rate was increased a quarter percentage point from its level of (practically) zero since the end of 2008. The rate on a 30-year mortgage is about a half of a percentage point higher than in 2012, but still lower than at any point prior to 2011. This means that housing credit remains cheap for consumers who are positioned to be homebuyers. 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Selected Interest Rates Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Source: Federal Reserve Board of Governors Fed Funds Rate 30-yr Mortgage Rate Figure 10: Selected Interest Rates 7
University of Michigan Survey Results Since 1978, the University of Michigan has produced its Index of Consumer Sentiment. The index is comprised of the responses to five questions, two about current conditions and three about consumer expectations. In recent history, the index was at its lowest post-great Recession level in August 2011 during one of the national debates about raising the debt ceiling. Because the questions that make up the Index of Consumer Sentiment reflect not just personal financial evaluations, but also views on the national economic condition, it is possible for the index to fall even as traditional economic indicators improve. In, the Index of Consumer Sentiment stood at 90.0, up from its level in September, but down from the year ago level of 93.0. At the national level, respondents to the survey had a brighter view of their current economic conditions than the expectations for the next year and five year period. In fact, although the current conditions index has recovered substantially since the disaster of the Great Recession, expectations for the future have fallen more dramatically. Table 1: The University of Michigan Index of Consumer Sentiment Date of Survey Index of Consumer Sentiment Index of Current Conditions Index of Consumer Expectations 82.5 96.6 73.5 October 86.9 98.3 79.6 93.0 105.0 85.3 September 87.2 101.2 78.2 90.0 105.6 80.0 120 Index of Consumer Sentiment 100 80 60 40 20 0 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 University of Michigan Index of Consumer Sentiment Source: University of Michigan Survey of Consumers, Arvest Consumer Sentiment Index Figure 11: University of Michigan Index of Consumer Sentiment 8
140 Index of Current Conditions and Index of Consumer Expectations 120 100 80 60 40 20 0 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Index of Current Conditions Index of Consumer Expectations Source: University of Michigan Survey of Consumers Figure 12: University of Michigan Index of Current Conditions and Index of Consumer Expectations Regional Results The Arvest Consumer Sentiment Index presented here for the region, which encompasses the states of Arkansas, Oklahoma, and Missouri (including the Kansas side of Kansas City), is based on the methodology developed by the University of Michigan for its national level Index of Consumer Sentiment. The index is based on five questions that evaluate consumer perceptions about their current and future finances, and their perceptions about current and future business conditions. In addition to these five questions, the Arvest Consumer Sentiment Survey collects additional information from respondents about plans to purchase major household items, current levels of consumer debt, current and planned savings, and demographic information. Surveyors were able to collect these perceptions using telephone surveys conducted in. The Arvest Consumer Sentiment Index for the Region was 83.4 in, which was higher than the September reading. Families with incomes over $75,000 were more confident about the current and future state of the economy than families with incomes under $75,000, although the families with incomes over $75,000 were less positive about the economy in than they were in September. 9
Consumer Sentiment Table 2: Arvest Consumer Sentiment Index for the Region by Income Date of Survey All Families Families with incomes under $75,000 Families with incomes over $75,000 71.4 65.8 82.6 October 72.6 67.6 85.5 83.2 79.1 93.9 September 82.6 78.2 92.5 83.4 83.4 88.3 Respondents in the region who were aged between 18 and 24 were more optimistic about current and future business conditions in than all the other age cohorts, with an index reading of 91.8. Respondents between the ages of 25 and 44 were also more optimistic compared to the older cohorts of those between the ages 45 and 64 and those who were 65 and older. With the exception of respondents aged 65 and older, all other age cohorts were less optimistic about current and future business conditions in the reading compared to the September readings. Table 3: Consumer Sentiment Index by Age Subgroup Date of Survey Aged 18-24 Aged 25-44 Aged 45-64 Aged 65+ 73.3 78.3 69.3 63.4 October 89.7 79.2 64.1 64.4 95.7 86.7 80.4 74.0 September 94.9 90.1 76.5 71.6 91.8 89.3 76.1 74.4 Consumer sentiment increased with education attainment for the Arvest Consumer Sentiment Index readings of. Bachelor s and graduate degree holders were more positive than the regional average with index readings of 84.1 and 89.6 in. However, bachelor s degree holders saw a substantial drop in their average consumer sentiment reading from September. Respondents with a high school degree or less were more negative than the regional average with a consumer sentiment index of 80.2. However, this was an improvement from the September reading of 76.0. Table 4: Consumer Sentiment Index by Educational Attainment Date of Survey High School or Less Bachelor s Degree Graduate Degree 64.0 76.1 85.3 October 63.3 83.6 85.9 75.3 84.8 91.2 September 76.0 93.3 89.0 80.2 84.1 89.6 In, regional residents with children aged 17 and under in the household had a consumer sentiment reading of 85.2, expressing more positive views about the state of the economy than 10
households without children under the age of 17. Both household with and without children were more optimistic about the economy in than they were in September. Table 5: Consumer Sentiment Index by Presence of Children in the Home Date of Survey Children No Children 69.5 69.9 October 72.5 71.4 79.5 84.4 September 82.1 80.8 85.2 81.8 Respondents who were retired, disabled, or not participating in the labor force for some other reason in were more pessimistic about the state of the economy (consumer sentiment index of 76.4, down from 78.1 in September ) than those who were unemployed, whose consumer sentiment index was 76.7 (down from 79.3 in ). The employed residents of the region were far more optimistic about the state of the economy than the other categories as their index increased strongly to 88.0 in from 82.8 in September. Table 6: Consumer Sentiment Index by Employment Status Date of Survey Employed Unemployed Not in Labor Force 74.2 61.3 63.8 October 75.8 56.4 70.5 85.3 81.3 79.3 September 82.8 79.3 78.1 88.0 76.7 76.4 Homeowners in the region were more positive about the state of their personal finances and general business conditions than non-homeowners in. Both groups were more positive about the economic situation in than in September. Table 7: Consumer Sentiment Index by Homeownership Status Date of Survey Own Home Rent 71.1 69.8 October 73.4 67.3 81.8 86.1 September 82.6 79.9 84.0 80.6 Compared to September, respondents were less positive when asked in if their current financial situation was better or worse than their situation a year ago. The index declined sharply from 106.0 in September to 96.0 in. However, they were more optimistic when asked in about the expected financial situation in a year, as indicated by an index of 126.0, than when they were asked in September (index of 120.0). The survey respondents were more optimistic about 11
the prospects for general business conditions over the next year, but less optimistic about conditions over the next five years than in September. This mixed optimism is reflected in the index reading of 96.0 for business conditions in a year (up from the September reading) and 94.0 for economic conditions over the next five years (down from the September reading). Respondents in remained quite positive about buying conditions in the next six months as reflected by the index of 137.0 (down from 128.0 in September ). Overall, respondents from the region were slightly more optimistic about the future economic conditions in than they were in September, while they were unchanged in their outlook about their current status in from September. The current conditions index remained at 90.3 in September, and the consumer expectations index increased to 78.9. Table 8: Components of Consumer Sentiment Index Date of Survey Personal Finances Current (1) Expected (2) Business Conditions 12 months (3) 5 Years (4) Buying Conditions Current Conditions Index Consumer Expectations Index (5) (1, 5) (2, 3, 4) 89.0 106.0 79.0 81.0 113.0 78.7 66.7 October 93.0 110.0 75.0 81.0 118.0 82.0 66.5 103.0 118.0 95.0 97.0 135.0 92.2 77.4 September 106.0 120.0 92.0 99.0 128.0 90.3 77.5 96.0 126.0 96.0 94.0 137.0 90.3 78.9 The majority of those surveyed in (51 percent) indicated that their personal finances were not very different from a year ago, while 22 percent of the respondents (down from 24 percent in September ) said that they were financially better off than they were a year ago. 26 percent of the respondents in felt that they were doing worse than a year ago, which up substantially from September. Table 9: Current Financial Situation Compared with a Year Ago October September Better Off 17% 20% 23% 24% 22% Same 55% 54% 58% 57% 51% Worse Off 28% 26% 19% 19% 26% Responses 1,171 1,218 1,171 1,198 1,328 Index Score 89.0 93.0 103.0 106.0 96.0 12
The vast majority of the survey respondents in said that they expect their personal finances to be better (38 percent up from 33 percent in September ) or the same (50 percent, down four percentage points from September ) in a year. However, 12 percent indicated in that they expect their financial situation to deteriorate over the next year, which was one percentage point lower than the reading in September. Table 10: Expected Change in Financial Situation in a Year October September Better Off 27% 29% 33% 33% 38% Same 51% 51% 53% 54% 50% Worse Off 22% 19% 14% 13% 12% Responses 1,122 1,178 1,144 1,149 1,237 Index Score 106.0 110.0 118.0 120.0 126.0 Respondents from the region in had more neutral views about expected business conditions in a year, with 28 percent (down from 41 percent in September) of them expecting bad times. 24 percent of respondents in indicated that the business conditions would be good in a year, down from 32 percent in September, while 47 percent (in a large jump from September ) were uncertain. Table 11: Expected Change in Business Conditions in a Year October September Good Times 29% 25% 34% 32% 24% Uncertain 22% 24% 27% 27% 47% Bad Times 49% 51% 39% 41% 28% Responses 1,060 1,104 1,089 1,084 1,261 Index Score 79.0 75.0 95.0 92.0 96.0 46 percent of the respondents in (up slightly from September ) indicated that they expect a continuing poor economy with periods of widespread unemployment and depression in the next five years while 41 percent expected the country to have an improving economy with continuous good times (down from 43 percent in September ). Table 12: Expected Change in Economic Conditions in 5 Years October September Continuous Good 37% 36% 42% 43% 41% Times Widespread 56% 55% 45% 45% 46% Unemployment Other 7% 9% 13% 12% 13% Responses 1,111 1,163 1,113 1,132 1,164 Index Score 81.0 81.0 97.0 99.0 94.0 13
53 percent of the respondents in (down two percentage points from September ) indicated that current conditions were apt for buying household items such as furniture, televisions, refrigerators, and such items. 31 percent said that the conditions were mixed while 16 percent (down 9 percentage points from September ) said that current buying conditions for larger household items were bad. Table 13: Buying Conditions October September Good Times 47% 50% 59% 55% 53% Mixed Good 20% 19% 17% 19% 31% and Bad Bad Times 33% 31% 24% 27% 16% Responses 1,069 1,110 1,075 1,101 1,249 Index Score 113.0 118.0 135.0 128.0 137 Regional Household Purchases 39 percent of those surveyed in indicated that they purchased major household items such as furniture, televisions, refrigerators, and others during the last six months. This reading was almost unchanged from September and. Meanwhile 61 percent of the respondents in did not purchase a major household item in the last six months. Table 14: Recent Major Household Purchases Made major household purchase in the last 6 months Did not make a major household purchase in the last 6 months October September 39% 36% 38% 38% 39% 61% 64% 62% 62% 61% Responses 1,173 1,223 1,173 1,200 1,328 34 percent of survey respondents in (up six percentage points from September ) said that they planned to purchase a major household item in the next six months while 66 percent said that they had no such plans. 14
Table 15: Major Household Purchase Plans Plan to buy a major household item in the next six months Do not plan to buy a major household item in the next six months October September NA 24% 25% 28% 34% NA 76% 75% 72% 66% Responses NA 1,207 1,152 1,179 1,220 Of the respondents who did not plan to purchase a major household item in the next six months, 19 percent (up two percentage points from September ) indicated that they were waiting for the right time to purchase a major household while 81 percent had no plans to buy at all. Table 16: Major Household Purchase Plans October September Waiting to NA 19% 17% 17% 19% Purchase No Plans to NA 81% 83% 83% 81% Purchase Responses NA 955 883 894 777 Regional Consumer Debt, Credit Conditions and Savings 32 percent of the respondents to the survey in had mortgage debt, 41 percent had credit card debt, 33 percent had auto loans, 21 percent had outstanding student loans, and 4 percent had home equity loans. More respondents in were carrying auto, credit card debt, and student loans compared to September. Only 22 percent of respondents indicated that they had no consumer debt, which was the lowest reading since the inception of the survey. Table 17: Percentage of Respondents with Consumer Debt October September Mortgage 37% 33% 39% 39% 32% Home Equity 6% 6% 6% 8% 4% Auto Loan 28% 29% 31% 32% 33% Credit Card 31% 36% 38% 40% 41% Student Loans 11% 14% 13% 14% 21% None 33% 31% 28% 27% 22% 15
Six percent of the respondents in indicated an intention over the next six months to acquire a mortgage, two percent had plans to seek home equity loans, eight percent had plans to acquire auto loans, four percent had plans to acquire student loans and nine percent had plans to add credit card debt. More respondents in indicated plans to acquire debt in all categories, except student loans, than in September. Table 18: Percentage of Respondents who Anticipate Acquiring Credit October September Mortgage NA 3% 3% 2% 6% Home Equity NA NA NA 1% 2% Auto Loan NA 4% 5% 4% 8% Credit Card NA 4% 3% 2% 9% Student Loans NA 4% 6% 5% 4% 52 percent of the respondents in (down from 82 percent in September ) were not seeking to acquire credit in the next six months. 11 percent of respondents (up from 5 percent in September ) indicated that credit conditions may be difficult while 37 percent indicated that they did not anticipate difficulty in acquiring credit. Table 19: Percentage of Respondents who Anticipate Difficulty Acquiring Credit October September Yes NA 5% 4% 5% 11% No Plans to NA 70% 74% 82% 52% Acquire Credit No NA 24% 21% 13% 37% The average reported savings rate of respondents to the survey was 15.8 percent in, which was up from 13.6 percent in September. In, families with incomes under $75,000 saved an average of 14.0 percent of their income (up from 10.0 percent in September ), while families with incomes over $75,000 saved an average of 18.0 percent of their income (down from 18.6 percent in September ). On average, families without children were able to save 15.5 percent of their income in (up from 13.9 percent in September ), which was lower than the 16.1 percent of income saved by families with children under the age of 17 in the household in (up from 12.8 percent in September ). 16
Table 20: Current Household Savings Rates October September Overall 11.6% 12.1% 12.4% 13.6% 15.8% Responses 996 1,043 1,004 984 1,148 Families with incomes under 9.8% 8.0% 8.5% 10.0% 14.0% $75,000 Families with incomes over 16.5% 18.1% 17.1% 18.6% 18.0% $75,000 Families with Children 10.2% 11.9% 11.7% 12.8% 16.1% Families with No Children 11.6% 12.2% 12.6% 13.9% 15.5% The vast majority of the survey respondents in intended to keep their current savings rate unchanged, while 22 percent (up from September ) were planning on increasing their savings rate. Only 10 percent (up from September ) indicated an intention to decrease their savings rate over the next six months. Table 21: Planned Household Savings Rates October September Increase savings rate 17% 20% 20% 20% 22% Keep current savings 72% 71% 72% 71% 68% rate Decrease savings rate 11% 8% 8% 8% 10% Responses 975 1,033 958 1,016 1,217 17
Arkansas Current Economic Situation Much like the national economy demonstrated modestly strong economic performance over the first quarter of, the Arkansas state economy also saw improvement. The Federal Reserve Bank of Philadelphia publishes a monthly coincident index for each state that summarizes non-farm payroll employment, average hours worked in manufacturing, the unemployment rate and real wage and salary disbursements. Throughout the end of and beginning of, this index increased strongly, growing to new heights each month. 180 Arkansas Coincident Index 170 160 150 140 130 120 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Federal Reserve Bank of Philadelphia Figure 13: Arkansas Coincident Index On the unemployment rate front, the first two months of have seen declining rates, which is good news. Additionally, the decline in the Arkansas unemployment rate is not accounted for by declines in the labor force; rather, the labor force in the state was growing at a pace not seen since 2005. This is a significant improvement over 2013 and the early part of which were characterized by falling labor force in the state. 18
Figure 14: Arkansas Unemployment Rate Labor Force, Year Over Year Percent Change 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Source: Bureau of Labor Statistics Figure 15: Arkansas Labor Force Growth Both the labor force growth rates and the unemployment rate come from the Bureau of Labor Statistics survey of households. Another survey is conducted each month with businesses as the respondents. That survey showed a similar story as the household employment picture. The level of non-farm employment was at its highest point ever in December and the seasonal declines since then have been consistent with continued growth. Annual non-farm payroll growth was strongest in the leisure and hospitality, 19
trade, transportation and utilities, and information sectors. Job losses over the year occurred in the mining and logging (including natural gas exploration), and manufacturing sectors. Figure 16: Arkansas Non-Farm Employment Figure 17: Arkansas Employment by Sector State personal income levels are reported on a quarterly basis from the Bureau of Economic Analysis. Since 2000, personal income in Arkansas has grown somewhat faster than the national average. However, at the end of 2013, personal income levels in Arkansas declined slightly, largely due to declines in farm 20