Consumer Spending Expected to Slow in the Second Half of 2024

US consumer spending, which accounts for two-thirds of economic growth, remained flat in February, in line with normal seasonal trends. This comes after a robust round of spending in December and a slowdown in January. The Conference Board's Consumer Confidence Index dipped in February, indicating a slight decrease in consumer sentiment compared to the previous month. Inflation increased in February, with prices at the fuel pump rising by 3.8% and airline fares growing by 3.6%. Clothing prices also increased by 0.6% and used vehicle prices by 0.5%. Nonfarm payrolls increased by 275,000, but the unemployment rate rose slightly to 3.9% and wages grew by only 0.1% for the month. Despite these mixed economic indicators, credit union portfolio data shows that February transaction volume rose in both credit and debit categories on a rolling 12-month basis. Seasonal events such as the Super Bowl and Valentine's Day drove targeted lifts in spending in specific merchant categories. However, inflation continues to impact grocery spend, with prices roughly 19% higher than before the pandemic. Credit balances were higher compared to the previous year, but aggregate portfolio balances fell month-over-month for the first time since February 2023. Credit unions are advised to review their credit portfolios, offer line increases, and remind members of the convenience and safety of using debit. They should also consider targeted campaigns on travel-related expenses. [b3543313]

Inflation in February increased to a higher-than-expected annualized rate of 3.2%, driven by rising prices at the fuel pump, airline fares, clothing, and used vehicles. Nonfarm payrolls increased by 275,000, but the unemployment rate rose slightly to 3.9% and wages grew by only 0.1% for the month. The Conference Board's Consumer Confidence Index dipped in February, indicating a slight decrease in consumer sentiment compared to January. Credit union portfolio data shows that February transaction volume rose in both credit and debit categories on a rolling 12-month basis. Seasonal events such as the Super Bowl and Valentine's Day drove targeted lifts in spending in specific merchant categories. However, inflation continues to impact grocery spend, with prices roughly 19% higher than before the pandemic. Credit balances were higher compared to the previous year, but aggregate portfolio balances fell month-over-month for the first time since February 2023. Credit unions are advised to review their credit portfolios, offer line increases, and remind members of the convenience and safety of using debit. They should also consider targeted campaigns on travel-related expenses. [b3543313]

Monthly consumer-spending growth fell from 0.7% in March to just 0.2% in April. Retail sales have weakened, with brands from McDonald’s to 3M warning that customers are closing their wallets. Credit card data shows that households have burned through their pandemic-era excess savings and are relying on credit cards to meet their outgoings. Delinquency rates for credit cards and car loans are increasing. However, some experts see rising delinquency rates as a return to normality, rather than a harbinger of worse to come. Rising incomes and low inflation may help avoid a consumer crunch. [bf05f8ad]

Consumer spending in the US has been propped up by incomes, savings, and debt, but all three drivers are now running out. Real incomes, which had been beating inflation, have slowed down to just 1% year-on-year. Americans built up over $2 trillion in excess savings during the pandemic, but those savings have now been used up. Private debt has skyrocketed to a new record of $17.5 trillion, with credit card delinquencies up 50% year on year. As a result, consumers are exercising spending restraint, particularly in areas like cars, consumer durables, restaurants, and leisure. The economy is also showing signs of decline, with GDP growth dropping from 4.9% to 1.3% in just 9 months. The article suggests that the government may need to ramp up spending or face the consequences of a crashing economy. [6d5acddd]

Consumer spending in the US is slowing down, with retail spending dipping 1.3% over the last three months. This decline in spending, along with a 4% decline in retail sales in the first quarter, is seen as a sign of a consumer-led recession on the horizon. Economic experts believe that consumers are reining in their spending habits after a period of robust spending that has propped up economic growth. Factors such as inflation, a cooler job market, and higher living costs have contributed to a decline in consumer sentiment. Consumer finances, especially among lower- to middle-income households, are also looking worse, with the delinquency rate on credit card loans at its highest level in 13 years. The McKinsey survey found that 76% of consumers made a 'trade-down' in the first quarter, searching for cheaper prices or switching to cheaper brands. These spending cuts could have a negative impact on GDP, which has already softened after strong growth in previous quarters. Projections suggest that the US has a 52% chance of slipping into a recession by May of next year. Economists believe that a further slowing of consumption is likely in the third quarter. [a11c5263]

Americans across all age groups have dramatically cut back on spending between April and June, with 39 percent of respondents saying they had cut back on discretionary spending. The rise in the cost of living was the primary concern for 50 percent of respondents, while 84 percent considered it among their top three worries. Concerns about inflation were high, with 63 percent of respondents expressing extreme or very concern. The survey also found that 66 percent of respondents were concerned about the rising price of gasoline, 40 percent were worried about the increasing cost of takeout and meal delivery, and 84 percent feared a rise in the cost of groceries. Despite the U.S. economy performing relatively well, most Americans think the country's economy is heading in the wrong direction. Forty-eight percent of respondents said their household income hadn't kept up with the rate of inflation in the past three months. A significant drop in Americans' spending could have a meaningful effect on the U.S. economy, potentially leading to a slowdown. [d9a2782f]

Consumer spending has started to slow in recent months and is expected to continue moderating through the remainder of the year. Lower-income consumers are most affected, while higher-income spenders are expected to keep the economy moving forward. Discretionary spending on entertainment, travel, and eating out could take a hit, as well as big-ticket purchases on credit. The slowdown in spending is attributed to a slowdown in real disposable income growth, a cooling labor market, higher tax payments, and higher interest rates. Younger and poorer consumers are feeling the squeeze and relying on credit cards, leading to delinquency and default. The Federal Reserve is closely watching consumer spending to see if increased borrowing costs are slowing spending enough to keep inflation in check. [f8b37846]