October 2024 Consumer Spending Trends: Wage Growth Sustains Momentum Amid Economic Uncertainty
The October 2024 "Consumer Checkpoint" report from the Bank of America Institute provides insights into U.S. consumer spending patterns, showing a modest growth rate amid changing market conditions. Here’s an in-depth breakdown of the report's key points:
Consumer Spending Trends
Consumer spending increased 0.6% month over month in September 2024. However, the overall year-over-year growth remains moderate. The data indicates a continued shift from durable goods like appliances and electronics to services such as dining out and entertainment. This is part of a broader post-pandemic trend where people prioritize experiences over material purchases. Spending on durable goods has remained relatively stable, though consumers avoid high-value purchases due to economic uncertainty and inflation concerns.
Wage Growth and Spending by Income Groups
Wage growth has played a critical role in sustaining spending, especially for lower-income households, where the impact of wage increases has been more pronounced. Higher-income households, meanwhile, continue to spend, albeit at a slower rate. This division in spending habits highlights the uneven impact of inflation across different income brackets. While inflation has eased, it still affects discretionary spending, with lower-income families allocating more of their budgets toward essential items like food and housing.
Home Equity and Wealth Effect
The report highlights that home equity in the U.S. remains historically high. However, this might not translate into increased consumer spending, as older, wealthier households hold most home equity. These groups are less likely to tap into their home equity for consumption. Additionally, with rising interest rates, fewer homeowners are taking out home equity loans, further limiting the potential for a wealth effect to boost spending.
Consumer Sentiment and Outlook
Consumer sentiment remains mixed. While wage growth supports spending, inflation and rising interest rates weigh on consumers' purchasing power, particularly in housing and other high-ticket items. The report suggests that while some resilience is expected in the service sector, durable goods consumption may continue to face headwinds in the coming months.
In conclusion, the October 2024 Consumer Checkpoint report paints a nuanced picture of the U.S. economy, where wage growth and consumer preferences reshape spending habits. Although there are positive trends in specific sectors like services, inflation, and economic uncertainty will likely dampen more significant consumer spending growth in the near term.