Americans remain in a healthy spending posture in the final weeks of the holiday shopping season but there are tentative signals that US consumer activity could weaken into spring next year
BOSTON, Dec. 18, 2024 -- The US consumer remains in a healthy spending posture going into the final weeks of the crucial holiday spending season but momentum behind Americans' discretionary spending has slowed and there are tentative early warning signs that spending may weaken into the spring, the latest results of the Bain & Company/Dynata Consumer Health Indexes, released today, show.
December results of the Consumer Health Indexes (CHI) show a fall in the survey data's headline gauge of the US consumer outlook, by 1.1 points from November's reading, to 101.0. Alongside, the CHI gauge of spending intentions across all US consumers, the data's composite spending index, fell by 2.4 points from last month's level, dropping to 102.5, although it remains up by 0.6 points over the past three months.
Taken together, the CHI data continues to provide a net positive overall signal on consumers' immediate spending intentions when compared with the same time last year, when these were trending down from a high set during a post-pandemic rebound.
However, this positive signal comes alongside cloudier indications for prospects for US consumer activity going into 2025. One source of concern was the driver of December's 2.4-point decline in the survey's spending intentions reading, with this being primarily due to a 3.2-point drop in spending intent among upper-income earners, with incomes of $100k a year or more, who represent the majority of discretionary consumer spending in the US.
Looking beyond the present holiday season, there were further tentative warning signs over whether consumer demand and spending growth may weaken into spring next year, particularly if employment conditions in the economy were to soften.
First, the CHI consumer outlook score for lower-income Americans, earning up to $50k a year, fell slightly, by 0.4 points, to 97.1. This series is now settling at levels below 100, giving a negative signal that has persisted for several months, and raising concern this reflects a worsening environment for jobs among this group. In addition, the CHI data also showed a significant spike in middle-income Americans' intent to use debt, with this measure jumping by 7.8 points in a single month in December, to 106.8. While this reading is only a single data point, it confirms a longer upwards trend of debt use among middle-income earners (with incomes of $50-100k a year), consistent with increasing household debt levels for this group.
The findings released today are the key insights from the second edition of the Bain/Dynata Consumer Health Indexes to be publicly released. Bain & Company and Dynata have run the indexes since 2017 to provide business decision-makers with in-depth information and analysis on consumer trends for near-term and medium-term strategy and planning. Previously the data from the monthly CHI survey was provided to clients privately.
Karen Harris, partner at Bain & Company and managing director of the firm's Macro Trends Group, commented: "American consumers took a healthy step back in their spending plans this month. They remain in an overall healthy position as we close the holiday spending seasons, but some of the strong momentum we have observed in recent months has ebbed."
Harris added: "Upper-income earners' spending intentions moderated in December after four months of growing spending enthusiasm. These earners remain positively disposed to holiday spending – although some of the prior momentum has clearly dissipated. We also see some unease among lower-income earners in relation to their income prospects. This is consistent with other analysis we have done suggesting that all may not be well in the labor market. Meanwhile, middle-income intentions to use debt had been trending upwards since the middle of the year, and it remains a concerning sign of stress that we will continue to keep an eye on beyond this holiday season."
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