Arvest Survey: Arkansans Cautious On Spending, Debt And Economy

Most Arkansans and fellow consumers in neighboring states have held off making major household purchases over the last half of 2014 and have no plans to splurge on big ticket items well into 2015, according to the third and final phase of the Fall 2014 Arvest Consumer Sentiment Survey released Tuesday (Dec. 16).

The cautious sentiment among Arkansas consumers is in line with regional and national indicators that show most Americans are still concerned about the tepid recovery of the U.S. economy, despite lower inflation and energy prices.

Earlier this month, The Mid-America Business Conditions Index, a leading economic indicator for a nine-state region stretching from North Dakota to Arkansas, fell slightly from October’s lackluster reading. Indices over the past several months are pointing to positive, but slower, economic gains over the next three to six months for the region, said Creighton University economist Ernie Goss.

“A stronger U.S. dollar, plentiful supplies and weak global demand have pushed agriculture and energy prices lower. While I still expect positive growth, it will be down from the same period for 2013. North Dakota and Oklahoma are experiencing the negative influence of sharply lower energy prices while the remaining seven states (including Arkansas) are experiencing the negative impacts of much weaker crop prices. Growth in urban areas of the region will outstrip that of non-urban areas of the region in the months ahead,” said Goss, director of Creighton University’s Economic Forecasting Group.

Looking ahead six months, Goss said, economic optimism as captured by the November business confidence index, climbed to 61.5 from 61.2 in October. “Business optimism supported by improvements in the national labor market and cheaper fuel costs more than offset pessimism from weaker economic conditions in the regional energy and agriculture sectors,” he said.

The Arvest survey, which was also conducted in October, showed that fewer Arkansas consumers reported having existing mortgage debt, while the overall household savings rate in the state increased more than 2%.

Arkansas respondents holding a current home mortgage fell six points to 31% in October, down from 37% in June’s survey. Additionally, only 3% of Arkansans said they plan to get a home mortgage in the next six months.

The state’s household savings rate, meanwhile, increased from 9.5% to 11.9% during that same period. While the percentage of those planning to increase their savings rate dropped from 23% to 18%, the number of those planning to maintain their current rate went from 67% to 71%.

“In Arkansas, there was a marked decline in the number of respondents indicating that they have existing mortgage debt,” said Kathy Deck, director of the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas.

“When this response is combined with that of higher savings rates and the intent to maintain those savings rates, a reasonable interpretation is that Arkansans remain cautious and conservative about taking on new debt,” said Deck, lead economist for the survey.

Those are among the key findings from the final Arvest survey of 2014 that focuses on consumers’ attitudes concerning spending, saving and debt in Arkansas and neighboring states of Oklahoma and Missouri.

Arkansans’ consumer debt also fell below that of their neighbors in Missouri and Oklahoma in two categories: mortgage and home equity (4%). A total of 36% of Missouri respondents reported mortgage debt, and another 8% reported home equity debt, while Oklahomans reported 34% and 6%, respectively. Arkansas and Oklahoma also had 12% report student loan debt, while Missouri had 17% report the same.

In regard to spending, 36% of Arkansans surveyed said they have made a major household purchase in the last six months, down three percent from June. That includes items like furniture, televisions and refrigerators. Missouri (38% to 35%) and Oklahoma (43% to 38%) also had drops in this category.

October’s survey results include the answers to four questions not included in the June survey due to incomplete data. Those questions included whether respondents planned to buy major household items in the next six months, and why they might wait to make those purchases.

In Arkansas, 26% said they intend to make a major household purchase in the next six months. Of those not planning to make a major purchase, 25% said they were waiting for the right time to buy. In Missouri, those percentages were 27% and 20%, respectively, while in Oklahoma they were 22% and 16%.

“It’s great to see Arkansans being serious about savings,” said John Womack, chairman and CEO at Arvest Bank central Arkansas. “Additionally, this data is showing us that our consumers are planning major expenditures to fit with their budgets. We’re encouraged by that kind of forethought, and are ready and willing to help our customers plan their future financial path no matter what it might entail.”

The other new questions asked if respondents planned to acquire credit – whether it is mortgage, home equity, auto loan, credit card or student loan – in the next six months, and if respondents anticipated difficulty acquiring credit. The categories with the highest expected credit acquisition were auto loan and credit card, with 5% each. Of those who planned to acquire any type of credit, only 6% expected difficulty.