Americans’ personal financial satisfaction eased in the fourth quarter, but remained firmly in positive territory as a new administration entered the White House, the American Institute of CPAs reported Thursday.
The AICPA said rising inflation drove the slight decline in its Personal Financial Satisfaction Index, which measured 18.5, down 0.2 points from the third quarter. The index was 2.8 points higher than a year ago.
The PFSi weighs a variety of economic factors to determine the financial standing of what the AICPA calls a “typical American.” It is calculated as the personal financial pleasure index minus the personal financial pain index, two component subindexes.
These comprise four equally weighted factors that measure the growth of assets and opportunities, in the case of the pleasure index, and the erosion of assets and opportunities, in the case of the pain index.
The report noted that although financial pleasure continues upward, the increase in the pain index outpaced it by a small margin in the fourth quarter, reaching its highest level in 18 months. At 44.5, the pain index was 1.3 points higher than the previous quarter and 1.1 points higher than the year before.
The rise from the preceding quarter was driven largely by a 9.7 point increase in inflation. Inflation, the PFSi’s most volatile factor, continues to climb up from historic lows, and was the biggest contributor to fourth quarter index movement of any individual factor, either for pain or for pleasure.
This said, inflation remains below the Federal Reserve target of 2%.
The report said personal taxes, a second factor in financial pain, increased by 0.6 points from the previous quarter, but were down by 1.6 points from the year-ago level.