After years of high inflation, geopolitical turmoil, and economic recession in Europe, the US economy has managed to maintain its resilience. This is largely due to the fact that consumer spending in the United States accounts for about 70% of the GDP. However, recent data indicates a decrease in consumer spending, causing concern among economists about the future outlook of the American economy.
Last Thursday, Brian Moynihan, the CEO of Bank of America, mentioned that bank customers are slowing down their purchasing speed. He stated that consumer payments measured by credit card, check, and ATM withdrawals have grown by 3.5% since last year, a decrease from the 10% growth the previous year.
“Two customer groups closely related to the operation of the US economy are saying, ‘You know? I’m being cautious, slowing down (spending),” Moynihan said at a financial conference in New York, referring to consumers and businesses.
A recent survey by the accounting firm KPMG revealed similar findings. Despite most people maintaining an optimistic view of their financial situation, they are worried about the direction of the US economy. Additionally, 65% of respondents (including nearly 60% of those earning $200,000 or more) indicated that they plan to purchase more discounted items this year, while 14% plan to utilize buy now, pay later services.
These data suggest that regardless of income levels, Americans are changing their shopping habits, hoping to make their salaries stretch further.
According to a report by CNN on June 3rd, Peter Torrente, the head of banking and capital markets audit business at KPMG, stated that Americans are interpreting economic growth prospects through the lens of inflation, which is reflected in their daily lives. Consequently, despite a robust labor market and low unemployment rates, the decline in purchasing power is making it harder for people to predict the situation in the next year, thus affecting consumer outlook.
He noted that while the survey shows consumers are more optimistic about their financial situation, compared to surveys of CEOs, consumers are less optimistic about overall economic growth prospects in the coming year.
“You can see this reflected in some statistics regarding shopping patterns and habits. Regardless of income levels, despite a strong labor market and healthy household balance sheets, consumers still aim to engage in more discounted shopping in the next year,” he said.
According to data from the research firm Numerator, from March 2023 to February 2024, Americans on average shopped for groceries at 20.7 different stores, representing a 23% increase from the same period in 2019-2020. Analysts suggest that in addition to visiting more stores, shoppers are exploring cheaper locations and actively participating in various promotional activities.
In recent weeks, many retailers have started announcing price reductions in a bid to attract more customers. IKEA, for example, has significantly lowered prices on hundreds of products. In April of this year, a set of 18 pieces of cutlery at IKEA dropped from $49.99 to $29.99, the price of a glass door cabinet decreased from $229 to $189, and a bed frame with storage and a headboard saw its price reduced from $549 to $499. These items are not essentials.
Torrente noted that what’s surprising from the survey is that 75% of respondents do not believe that a rate cut by the Federal Reserve would improve their personal financial situation. While investors closely monitor the Fed, consumers seem less interested in it.