Before the holiday shopping season, the US economy is showing mixed signals: consumer confidence is declining, but overall household finances are not weakening across the board. The latest survey shows a divergence in the situations of different income groups, with some families facing pressure from high prices and sluggish income growth. However, high-net-worth individuals can still rely on stock and real estate market gains to support their spending and flexibly adjust their asset allocations.
According to Reuters, economists’ forecasts indicated a slight drop in US consumer confidence in November, with the consumer confidence index dipping from 94.6 in October to 93.4. On Tuesday, the Conference Board announced that the consumer confidence index fell from 95.5 in October to 88.7 this month.
Dana Peterson, Chief Economist at the Conference Board, stated that “consumers’ responses to factors affecting the economy in surveys are still mainly focused on prices and inflation, tariffs and trade, and politics, with an increase in mentions of the government shutdown.” However, he remarked that “mentions of the labor market have decreased.”
Furthermore, as reported by Reuters on Tuesday, JPMorgan Chase’s analysis of bank account data showed that inflation has caused income growth to fall back to levels comparable to the slow recovery after the Great Recession more than a decade ago. This could potentially limit American consumers’ purchasing power ahead of the crucial holiday retail season.
Researchers found that household income growth has been sluggish, with bank deposits basically keeping pace with inflation adjustments. Based on the balances in checking and savings accounts, in some cases, funds have been observed to move to higher-yielding money market instruments.
Despite these findings, as the peak consumption period of the year approaches, consumers’ overall financial situations can be described as mixed. Some key demographics are under pressure, but high-net-worth individuals can turn to stock and real estate market gains to support their spending as needed.
As of October, the research institute estimated that after adjusting for inflation, the median income growth rate for the 25-54 age group was 1.6%, similar to the early 2010s. Back then, the unemployment rate was around 7% and declining slowly, whereas the current unemployment rate stands at 4.4%.
The research institute also found that younger workers have not seen robust income growth like those who have changed jobs and received promotions early in their careers. After adjusting for inflation, around half of workers in the 50-54 age group experienced a decline in income.
In conclusion, the research report noted that during the holiday consumption season, spending will be restrained due to weak income growth, but the strong performance of the stock market provides additional support for some families. However, these gains are distributed very unequally. “It is worth noting that nominal income growth still roughly matches pre-pandemic levels, but due to faster price increases, the actual growth in purchasing power remains relatively limited.”
(Translated and rewritten article citing relevant reports by Reuters)