The economy across the Natural State is looking up which has helped hoist consumer sentiment measured by Arvest Bank’s semi-annual survey. This spring report released Tuesday (May 12) shows the index measuring Arkansas consumer sentiment rose to 79.1 in March, up from 68.1 in October and 67.4 in June 2014.
The survey also includes consumers in Oklahoma and Missouri, including Kansas City. While Arkansas’ consumer sentiment has risen consistently since the survey began last summer, the rate of exuberance continues to lag levels registered by consumers in Missouri and Oklahoma.
Missouri respondents returned a consumer sentiment index reading of 85.2 in March, 77.4 in October 2014 and 68.6 last June. Missouri registered the highest sentiment reading this spring, just shy of the national level at 85.3 which is compiled by the University of Michigan.
Oklahoma’s sentiment reading was also higher than Arkansas at 84.8 in March, up from 72.6 in November 2014 and 76.4 in the June study, according to the report.
In Arkansas, the largest gains among consumers surveyed in March came from three specific groups. Among respondents with no children the index jumped from 59.7 in October to 92.9 in March. The most optimistic group surveyed were young Arkansans ages 18 to 24, this cohort’s index rose from 92.4 in October to 113 in March. Another notable increase – from 66.5 to 90.8 – came from Arkansans who are unemployed.
“The state’s improving employment and income situation, along with lower gasoline prices at the pump, gave consumers a boost in both perceived current conditions and near-term expectations,” said Kathy Deck, director for the Center for Business and Economic Research at the University of Arkansas.
Arvest data has reflected Deck’s assertion, showing less total dollar spend in the fuel category, while deposits in consumers’ checking and savings accounts generally have risen.
“The increase in the Arkansas index is a sign that people are feeling better not only about their personal financial situation, but also have some confidence in the economy of the region as a whole,” John Womack, president and CEO of Arvest Bank in central Arkansas, said in the index report. “As their confidence grows, they will feel better about buying needed items for their families and maybe taking on some personal debt. Knowing this helps us to prepare to meet their financial needs in a way that works best for them.”
Improved consumer sentiment has played a role in improved home sales in the first quarter of 2015 in state’s four largest regions, according to recently released Arkansas Home Sales Report. The report is produced by The City Wire. First quarter home sales totaled 4,639, up from 4,302 in the same period of 2014, and up 11.09% compared to the same period in 2013. For the first quarter, home sales are up 5.33% in central Arkansas, up 7.91% in the Fort Smith metro, up 8.28% in the Jonesboro metro and up 11.22% in Northwest Arkansas.
Deck said the strength of Arkansas’ ongoing economic recovery that began in 2009 but has only recently gained noticeable momentum.
One of the signs that the economy is improving is that unemployment in the state has improved, she said. According to the Arkansas Department of Workforce Services, the unemployment rate in Arkansas improved to 5.6% from 6.4% a year ago. In real numbers, that means 1.26 million Arkansans have jobs in March 2015 compared to 1.21 million workers a year ago.
Deck said one thing to watch is mortgage rates, which have stayed low for a few years because of the Federal Reserve’s policy of keeping rates low for the purpose of strengthening the economy. If the Fed determines the economy is strong enough to stand on its own, then it may raise short term interest rates and those could cause mortgage rates to increase as a result.
According to Mortgage-X, the average interest rate on a 30-year mortgage at the first of May was 3.5%. Of the mortgage bankers polled around the nation by that site, 32.1% believe mortgage rates will remain unchanged over the next 90 days, while 42.9% believe rates will rise slightly over the next three months.
Deck said one danger about the current recovery is that wages have not increased and that worries some workers.