Americans’ personal financial satisfaction fell in the fourth quarter for the first time in seven quarters as market volatility took a toll on their confidence, the American Institute of CPAs reported Thursday.
The AICPA’s personal financial satisfaction index clocked in at 30.9, a 1.4 drop from the third quarter that erased 24% of the index’s gains from the previous three quarters.
The report noted that this was only the fourth time the index had decreased since clawing its way up from a -42.0 bottom in the 2011 third quarter.
If there was any good news, it was that even with the decline, the PFSi was still solidly in positive territory and not too far from recent record highs.
The PFSi is calculated as the Personal Financial Pleasure Index minus the Personal Financial Pain Index, with positive readings signaling that Americans are feeling more financial pleasure than pain.
The PFSi’s decrease was due to a 4.1-point decline in the Pleasure Index that outweighed a slight boost from a 2.6-point decrease in the Pain Index — a decline in the Pain Index improves the PFSi overall, according to the AICPA.
According to the AICPA, the fourth-quarter pleasure index, which comprises four equally weighted factors, was down 4.1 points to 70.2, ending nine straight quarters of record highs.
A 13.4-point drop in the PFS 750 Market Index drove the pullback. This AICPA proprietary stock index is made up of the 750 largest companies trading on the U.S. market adjusted for inflation and per capita.
All sectors declined, wiping out all of the PFS 750 gains from the three prior quarters and dropping the index to just below its fourth-quarter 2016 value. Worst hit were energy and industrials, while utilities had the most modest losses.
As a result of the sharp quarterly decline, the PFS 750 Market Index is no longer the biggest contributor to financial pleasure for the first time in nearly a decade.
“The recent stock market decline is a good reminder to focus on the long-term goals of your financial plan, and don’t let yourself be influenced by the prevailing financial winds,” Dave Stolz, a member of the AICPAs’ PFS credential committee. “Even with the recent market turbulence, economic conditions overall in the U.S. remain strong.”
Along those lines, the Job Openings Per Capita Index, which is now the largest contributor to the pleasure index for the first time since the 2001 second quarter, decreased a negligible 0.2 points, keeping it near its third-quarter record high. It increased 12.2 points from a year earlier, with gains in almost every sector.
Although the U.S. Federal Reserve has yet to release final December job numbers, 2018 is on pace to set a new record for job creation based on numbers through November, according to the AICPA. After 11 months, 2018 was averaging 870,000 jobs added a month. This compared with 2015, the biggest year on record for added jobs — an average of 802,000 jobs added each month.
The AICPA CPA Outlook Index, which captures the expectations of CPA executives in the year ahead for their companies and the U.S. economy, fell 2.8 points from the previous quarter. At a reading of 52, the fourth-quarter index was at the same value as in the first quarter of 2017. Despite the decline, it remained solidly in positive territory.