Poll Shows Consumers More Confident About Personal Finances

For four decades, Gallup has conducted annual polls, asking people to rate their own personal finances. In January 2017, 49 percent of people Gallup surveyed said they were financially better off than a year ago. Americans haven’t felt this confident about their finances since 2007, when 50 percent said they were better off than the previous year.

At no point in the poll’s history have more than 58 percent of people said they were better off than the year before. So this year’s results are among the highest. And 66 percent said they expected their finances to be even better a year from now.

These poll results are good news for businesses. When consumers feel more confident, they spend more money. In 1999, the year in which the highest number of Gallup respondents felt they were better off than the year before, consumer spending rose in all categories, according to the Bureau of Labor Statistics. Whereas the year before, consumer spending on entertainment had dropped 3.7 percent, it rose by 8.3 percent in 1999.

Indicators for 2017

According to Kiplinger, spending increased across several retail sectors in January, and retail sales are expected to increase by 3.9 percent this year.

The week ending Feb. 25 was the 104th straight week in which unemployment claims were below 300,000 – not since 1973 has the jobless rate been so low. With incomes up slightly at the end of 2016, and unemployment low, personal savings fell to $768.4 billion in December – an indication that households are more confident about finances and less worried about saving money for emergencies.

Uncertainty About Interest Rate Hikes

When the economy is healthy, the Federal Reserve usually responds by raising interest rates. Janet L. Yellen, Federal Reserve chairwoman, said in early March that the benchmark interest rate would likely increase before month’s end, and two more interest rate increases were expected before the end of the year.

An interest rate hike may affect businesses in several ways. Business owners with variable-rate credit cards or loans may have higher monthly payments. But those costs may be offset by gains on investments. Reinvesting in short-term bonds as interest rates increase can help build retirement wealth.

Interest rate hikes are expected to be beneficial for banks, investment firms, and credit card companies, which means the value of their stock would increase accordingly. Insurance companies with diverse investment portfolios may also see an increase in stock value.

For years, interest rates remained stagnant, and while that may have been bad for banks, it’s one of the ways the Fed stimulates growth. Low interest rates encourage consumers to buy. And when consumer confidence returns, and jobless claims fall, the Fed bumps up interest rates.

The 2017 economy may affect some businesses differently than others. For entrepreneurs looking to open their first business, rising interest rates may mean they’ll want to apply for business loans before any additional rate increases take effect. And business owners with investments may want to consult their financial advisors to determine how best to take advantage of higher interest rates.

Lusk Law, LLC, specializes in assisting businesses plan for the future. In Frederick County, Howard County, Baltimore County, Baltimore City, Carroll County, Washington County, and Anne Arundel County, and other counties in Maryland and Virginia, we have advised business owners about regulatory changes that may affect their bottom line. If you need legal guidance for your business, please call us at 443-535-9715 or fill out our contact form if you have any questions about this topic.

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