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The trend of consumption in the US: the ‘boomers’ lead spending and not saving

Date: February 23, 2024 Time: 23:04:11

Tell me how it is spent and I will tell you the future. Consumption trends provide an idea of ​​the general economic state of the economy. Domestic demand, which always weighs heavily on GDP, is important for measuring economic dynamism. Just like pulling your credit card, which can be symptomatic of good and bad trends, especially in America. Observing the consumption data via credit in the North American country usually gives clues.

The latest report from Bank of America, in this sense, reveals that the aggregate spending per household with credit and debit cards from the entity required 0.2% year-on-year in May, which represents an improvement compared to the fall of 1, 2% year-on-year registered in April. On a month-on-month basis, consumer spending appears to have held relatively steady, with card spending per household seasonally adjusted (SA) rising just 0.1% between April and May.

The decline in year-on-year spending in the past two months partly reflects “base effects”, as spending increased in 2022 after the economy reopened and this is increasingly part of the denominator in year-on-year growth comparisons. A closer look at the breakdown over the past year shows that retail spending has picked up in recent months, after a long period of decline.

In services, for its part, it has shown some signs of evident after having experienced constantly until February 2023. Within this item it is evident that in restoration a significant upward trend has been observed. Meanwhile, spending money on airline tickets or accommodation appears to be on a slight downward trend.

“As we discussed in a previous Consumer Morsel report, travel spending is a mix of factors… Spending during the categories that recovered fastest from the pandemic, such as accommodation, appears to have already peaked, while in the late-recovering sectors, including cruises, remains elevated,” says Bank of America.

However, what is striking is the great differences in spending between generations. Specifically, Baby Boomers (born between 1946 and 1964) and traditionalist households (between 1928 and 1945) show higher year-on-year growth rates of total card spending, according to internal Bank of America data. And the strength seems to go beyond favorable base effects.

“This is important because, while traditionalist households are relatively few in number, there are many more boomers, so the faster spending of this group is, to some extent, holding back the average aggregate,” the entity says. It is also striking that Generation X, made up of people born between 1965 and 1977, shows the same weaker trends as Millennials and Generation Z.

The younger generations continue to rely on savings

United States debt with credit cards. The share of total spending on credit cards has barely changed across generations.

“At the same time, median household savings and checking account balances remain well above 2019 levels for all generations,” explains the US bank. To date, the continued strength of the job market will likely also reduce the need for younger people to draw on their reserves.

That said, you still have a marked difference between the levels of wealth of the different generations. In particular, the older generations have much more wealth, which allows them to better weather the increase in the cost of living. According to the Federal Reserve, Baby Boomers had $73 billion in net worth in the fourth quarter of 2022, eight times more than Millennials.

Likewise, the different way in which the increase in the cost of housing is perceived between generations is another important influence in the divergence of generational spending per household. Data from Bank of America shows that Generation Z and Millennials are experiencing a much larger increase in median rent and mortgage payments than older generations.

“These differences in housing costs probably reflect important life cycle influences. Younger generations will have to move for work, to accommodate expanding families, and more generally because they seek more space as they mature, which exposes them more frequently to rising rents (especially when they move into a new home) than older generations,” Bank of America describes.

* This website provides news content gathered from various internet sources. It is crucial to understand that we are not responsible for the accuracy, completeness, or reliability of the information presented Read More

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.
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