While Cox Automotive mentioned that overall consumer sentiment has been steadily improving, TransUnion discovered the youngest generations continue to be more optimistic about their financial future in the next 12 months than their older counterparts.

The latest TransUnion Consumer Pulse study indicated that two in three Gen Z and millennials remain optimistic compared to approximately half of Gen X and Baby Boomers.

Overall, 53% of Americans remain optimistic about their financial future despite high inflation and recession worries, according to the TransUnion researched highlighted in a news release distributed last week.

The results from the Aug. 11-18 survey of 3,000 American adults found that the differences in optimism are largely connected to household finances.

Overall, TransUnion noted 40% of Americans reported that up to this point in 2022, their household finances were worse than planned. About 28% said they were better than planned.

Experts said this finding is not surprising when considering that 79% of consumers stated that inflation was one of their top three financial concerns. The annual inflation rate in the U.S. has remained above 8% since March.

The high inflation environment is likely one of the causes for the differences in financial optimism, with far more consumers in younger generations stating their finances this year are in a better place than they planned. Younger consumers, by a wide margin, also reported having experienced higher income growth in the last three months and expect more income increases in the next 12 months.

“Consumers, especially those in the youngest generations, continue to be resilient despite the many challenges they are facing,” TransUnion head of global research Charlie Wise said in the news release. “A high inflation environment coupled with rising interest rates and recession fears would normally point to much less optimism about consumer finances.

“What is causing this positive outlook? While there are likely many reasons, first and foremost, is that the employment picture remains strong,” Wise continued. “As long as job opportunities remain, many consumers will be able to weather these obstacles.”

Perhaps being gainfully employed had an impact in the consumer measurements Cox Automotive highlighted in a Data Point on Monday.

Cox Automotive recapped that initial August reading on Consumer Sentiment from the University of Michigan increased 1% to 59.5.

“The increase was primarily from improving future expectations,” Cox Automotive said in the Data Point. “Expected inflation rates declined, which is a hopeful sign that at least consumer expectations for inflation have not become unanchored. Consumers’ views of buying conditions for vehicles were steady and near an all-time low.”

Cox Automotive also mentioned the daily index of consumer sentiment from Morning Consult increased 1.6% in the first 15 days of September.

Analysts pointed out that index has improved as gas prices have been falling. Cox Automotive indicated the average price of unleaded fuel nationally was $3.69 last week, down 26% from the peak in June.

More details of TransUnion study

To reinforce the importance of a strong employment market to the positive outlook, the TransUnion Consumer Pulse study found that nearly two-thirds (60%) of Americans believed the U.S. economy is already in a recession or will enter a recession by the end of the year.

The study determined a recession was the second most reported financial concern among Americans (inflation was No. 1) and 55% reported it as a top three concern.

Overall, TransUnion said 64% of consumers indicated they plan to reduce spending in preparation for a recession. While a majority among each generation planned to reduce spending, Baby Boomers said they’ll cut back the most (71%) compared to Gen Z (56%).

Youngest Generations More Optimistic as Finances in Better Position

Generation – Financial Picture Findings

Percent Optimistic About Their Financial Future

Percent Said 2022 Finances Better than Planned

Percent Said 2022 Finances Worse than Planned

Percent of Consumers Said Income Increased in Last 3 Months; Percent Expecting Income to Increase in Next 12 Months

Overall

53%

28%

40%

28% | 46%

Gen Z

66%

39%

30%

44% | 59%

Millennials

65%

41%

33%

41% | 61%

Gen X

49%

24%

47%

24% | 42%

Baby Boomers

40%

13%

45%

11% | 30%

Source: TransUnion

What does this mean for consumer finances?

While consumers may spend less in the short term, TransUnion pointed out they also are seeking credit.

A recent TransUnion Credit Industry Insights Report found that strong originations growth for credit cards and personal loans that began last continued through the early part of this as consumers increasingly sought these credit products and lenders expanded access to consumers.

TransUnion explained this revelation is important as credit was seen as important to achieve financial goals by 87% of Consumer Pulse respondents. Nearly half (46%) said credit access is extremely or very important.

“Consumers should always be diligent about their credit, but even more so in today’s dynamic economy,” said Margaret Poe, head of consumer credit education at TransUnion.

“It is always a plus to see more consumers gain access to credit as many credit products can alleviate short-term financial woes caused by job loss or rising prices for everyday goods and services. The key is to ensure these credit products are maintained well with on-time payments and reasonable utilization rates,” Poe went on to say in the news release.

The complete Consumer Pulse study can be viewed here.