Arkansas consumers ready to reduce debt, unsure about home purchase

The number of consumers in Arkansas looking to make a major household purchase over the past six months rose 5 points in March as wages saw a slight increase and cheap fuel prices boosted discretionary income, according to the final installment of the 2015 Arvest Consumer Sentiment Survey released Tuesday.

At the same time, the survey also showed that Arkansans are cautiously restructuring debt and paying bills, but on the flip side there was a big uptick in the number of consumers reporting more student loan debt. Also, the state’s household savings rates fell slightly, and only 2% of Arkansans are planning to enter the housing market and purchase a new mortgage in the next six months.

“Arkansans know that this is a good time to spend,” 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 and lead economist for the survey. “Low gas prices, low interest rates and slightly higher incomes pushed the buying conditions index all the way to 131.0. Those same conditions mean that Arkansans can also pay down some existing debt or increase their personal savings rates without sacrificing too much in the short term.”

The Arvest survey is the third and final installment for Arvest’s spring survey, conducted in March, that focuses on consumers’ attitudes concerning spending, saving and debt. An earlier second survey release on June 2 show similarly that many Arkansans are looking forward to purchasing a “big ticket” household item during the second half of 2015 as many have seen their personal financial situation improve this year.

The first phase of the Arvest survey showed that consumer confidence in Arkansas had jumped more than ten points since October, mainly because of the state’s improving employment and income situation, and lower gas prices.

Overall, the number of Arkansas respondents who said they made a major household purchase in the past six months went up 5 points in March to 39% compared with the October survey results. Major household purchases include items such as furniture, televisions and refrigerators.

Missouri, including Greater Kansas City, reported an increase from 35% to 39% in those who made major purchases in the past six months, while Oklahoma was the only state that reported a drop (38% to 35%) in this category.

Nearly 24% said they intend to make a major household purchase in the next six months. Of those not planning to make a major purchase, 13% said they were waiting for the right time to buy. In Missouri, those percentages were 25% and 20%, respectively, while in Oklahoma they were 28% and 20%.

In Arkansas, 24% of survey respondents said they intend to make a major household purchase in the next six months. Of those not planning to make a major purchase, 13% said they were waiting for the right time to buy.

Arkansas respondents holding a home mortgage rose three points to 34% in March from 31% October’s survey. Additionally, only 2% of Arkansans said they plan to get a home mortgage in the next six months.

The state’s household savings rate, meanwhile, decreased from 11.9% to 11.6% during that same period. Those planning to increase their savings rate rose from 18% to 19%, while the number of those planning to maintain their rate went from 71% to 74%.

Meanwhile, Arkansans’ consumer debt also fell below that of their neighbors in Missouri in mortgage and home equity (5%). A total of 42% of Missouri respondents reported mortgage debt, and another 9% reported home equity debt. Oklahomans reported 33% and 5%, respectively.

Arkansas reported its largest jump in consumer credit in the student debt category, with 27% reporting they had current student debt. In Missouri and Oklahoma, only 12% each reported they had student debt in the March survey.

When asked if respondents anticipated difficulty in acquiring credit in the next six months only 4% expected difficulty in Arkansas, Missouri and Oklahoma. In October’s survey, those numbers were 6% in Arkansas, 4% in Missouri and 7% in Oklahoma.

The Arvest Consumer Sentiment Survey, modeled after the national consumer sentiment survey released monthly by Thomson Reuters and the University of Michigan, is conducted by the Center for Business and Economic Research (CBER) in the Sam M. Walton College of Business at the University of Arkansas. The University of Oklahoma’s Public Opinion Learning Laboratory conducted the 1,200 random phone surveys.

The survey will be conducted twice a year, with the next survey expected to be completed in September 2015.