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As we enter the critical holiday spending weeks, the US consumer remains in a healthy spending posture. Momentum, however, has slowed versus earlier in the holiday spending season.
Spending intent across all consumers (the composite spending index) declined 2.4 points from last month’s level. But the composite spending intent score has increased marginally (by 0.6 points) over the last three months.
- Compared to last year, when overall spending intent was trending down off the Covid-recovery high, the recent upward trend in spending intent is a positive signal (even though this month’s reading represents a slight decline).
- Of concern, however, is the driver of this month’s decline. Upper-income earners, who represent the majority of discretionary spending in the US, reported a 3.2-point decline in their spending intent.
Looking past the holiday season, there are some tentative early warning signs flashing that consumer spending growth may weaken into the spring of next year, particularly if employment conditions in the economy soften.
- First, the lower-income outlook score fell slightly to 97.1. The series is now settling in at under 100. This represents a negative read for this data series, one that has persisted for several months, and we are concerned it reflects a negative employment environment.
- Second, we note a significant spike in middle-income intent to use debt, which increased 7.8 points in one month. While this is just one data point, it confirms a longer upward trend in debt usage among middle-income earners that we will continue to monitor.
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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