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The middle-income outlook score fell for the third consecutive month. While the value (100.4) is neither bad in absolute terms nor out of range for recent history, the unbroken downward trend is noteworthy.
Our middle-income outlook measure is based on this demographic group’s assessment of the forward-looking prospects for the value of their primary asset: their houses.
- This downtrend comes amid reports that housing inventories are reaching record levels in some states and building up rapidly in many more. We also note a Wall Street Journal report suggesting that significantly more inventory—mortgages in default that have been spared from foreclosure due to extended Covid-era relief and forbearance programs—may come to market in a disruptive manner if the new administration opts not to extend these programs.
- We speculate that at least a portion of our middle-income respondents, perhaps the portion in markets where housing prices have stalled and inventory is rising, are sensing downside exposure.
We caution that the risk of a housing market downturn is increasing, and initial signs of caution are already emerging in the middle-income outlook score. These factors suggest that middle-income spending may be impacted in the coming months.
The outlook score among upper-income earners continues to trend down but is technically still in neutral territory (100.4). Regular readers know that we derive upper-income households’ outlook from their forecasts for portfolio performance, so some may find this neutral reading surprising given the ongoing correction in US equities markets. However, the last three readings fall squarely within the midrange of values seen during the last correction (May 2022–March 2023) in US markets. This indicates that caution (not panic) has taken hold and that upper-income earners are awaiting the next developments in the markets before moving off their neutral, cautious stance.
While the outlook for middle- and upper-income consumers is decidedly cloudy, the lower-income outlook score—based on this group’s perceptions of their income prospects—has been rising over the past five months, from a negative read (~97) to a neutral one (~100).
Bain and Dynata created the Consumer Health Indexes in 2017 to support business decision makers in their near- and midterm planning for their businesses. To achieve this, we have been asking questions that are within the expertise of the people taking our surveys. What are their personal spending plans? What are their saving plans? What is their use-of-debt plan? These are direct, easily understandable questions about survey respondents’ near-term expected behaviors. They require little interpretation, macroeconomic expertise, or filtering through the lens of the political or news cycle. Since 2017, our clients have been using our Consumer Health Indexes as a differentiated data point relative to existing confidence indicators.
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