‘Tis the Season for Consumer Spending?

December 02, 2021 | ,

Line chart showing the personal savings rate and personal consumption amongst Americans. Chart subtitle: Personal savings rates have retreated from pandemic-induced highs, however several potential headwinds still face the American consumer this holiday season Chart description: Y-axis ranges from -15% to +30%. X-axis shows quarters from 3Q16 to 3Q21. Line for Personal Savings Rate is purple and line for Personal Consumption (Quarter-Over-Quarter Change) is dark green. Both lines were relatively steady up to 2Q20 as the coronavirus pandemic took hold of the economy. The Personal Savings Rate peaked in that quarter to 26.0% and the Consumption Rate Change decreased to the extremein 2Q20 then peaked the following quarter with a 10% increase. Both levels have returned to just slightly higher than normal levels in recent quarters. Chart source: Federal Reserve Bank of St. Louis as of September 30, 2021.

The COVID-19 pandemic resulted in significant changes to, among a plethora of other things, consumer behavior in the United States. As a result of the virus outbreak in early 2020, the personal savings rate of domestic consumers saw a dramatic increase to a record high of 26.0% in the second quarter of last year. This propensity for conservativism during times of economic hardship can clearly be seen in our chart this week. Direct relief payments made to individuals as part of the government’s massive stimulus program were among the primary contributors to increased personal savings rates, as consumers saw limited opportunities to spend while in lockdown. As time went on, many individuals used excess savings to pay down debt and invest in equity markets, which helped fuel historic levels of retail trading activity. Online retail sales also increased a few months into the pandemic in large part due to pent-up demand, as indicated by the 10.0% quarter-over-quarter change in personal consumption during the third quarter of 2020.

With the holiday season upon us, many investors are curious about the state of the American consumer in light of the challenges posed by the last two years. On one hand, consumer balance sheets remain relatively strong. At the end of the third quarter of 2021, the personal savings rate in the United States was roughly 9.6%, well above the figure recorded at the end of 2019 of 7.4%. This likely means that individuals have more cash at their disposal than in previous years. At the same time, there are several headwinds facing consumers that may persist into the new year. Higher costs due to inflationary pressures and supply chain difficulties have already impacted a significant number of Americans and may cause a drop in consumer confidence if these issues are persistent in nature. The Omicron variant and other strains of the COVID-19 virus may also lead to renewed calls for economic shutdowns, which could leave consumers with fewer spending options. Finally, it is important to note that while the personal savings rate rose overall for consumers during the first several months of the pandemic, increased rates of savings were disproportionately attributed to higher-income individuals and households. This could mean that a large subset of the population is ill-equipped to deal with rising costs and, as a result, unable to spend at levels consistent with history. Ultimately, only time will tell how the American consumer will respond to ongoing uncertainty and whether governments and policymakers will see a need to provide additional economic relief. In light of the dynamics at play and the headwinds currently facing consumers, investors should remain realistic and pragmatic about spending levels heading into the final month of 2021.

Print PDF > ‘Tis the Season for Consumer Spending?

 

The opinions expressed herein are those of Marquette Associates, Inc. (“Marquette”), and are subject to change without notice. This material is not financial advice or an offer to purchase or sell any product. Marquette reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs.

Related Content

This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Table describing categories and criteria of MSCI indices. Chart subtitle: Despite its rapid ascendancy in recent decades, China is categorized as an emerging country by MSCI due to the market classification framework utilized by the index provider. Chart source: Source: MSCI as of June 30, 2023. ATVR: Annualized Traded Value Ratio, which is a liquidity measure used to assess liquidity of securities in the MSCI Global Investable Market Indices. The ATVR corresponds to the Annualized Traded Value of a security relative to its Free Float‐Adjusted Market Capitalization. Chart description: First column is Criteria, second is Frontier, third is Emerging, and fourth is Developed. First row section is Economic Development, detailed with “Sustainability of economic development.” Frontier: No requirement. Emerging: No requirement. Developed: Country GNI per capita 25% above the World Bank high income threshold for 3 consecutive years. Second section is Size and Liability Requirements, with four sub-rows. First: Number of companies meeting the following Standard Index criteria: Frontier: 2 Emerging: 3. Developed: 5. Second: Company size (full market cap, USD): Frontier: $1,033M. Emerging: $2,066M. Developed: $4,133M. Third: Security size (float market cap, USD): Frontier: $73M. Emerging: $1,033M. Developed: $2,066M. Fourth: Security liquidity: Frontier: 2.5% ATVR. Emerging: 15% ATVR. Developed: 20% ATVR. Third section is Market Accessibility, with five sub-rows. First: Openness to foreign ownership: Frontier: At least some. Emerging: Significant. Developed: Very high. Second: Ease of capital inflows / outflows: Frontier: At least partial. Emerging: Significant. Developed: Very high. Third: Efficiency of operational framework: Frontier: Modest. Emerging: Good and tested. Developed: Very high. Fourth: Availability of investment instruments: Frontier: High. Emerging: High. Developed: Unrestricted. Fifth: Stability of the institutional framework: Frontier: Modest. Emerging: Modest. Developed: Very high. End chart description. See disclosures at end of document.

12.04.2023

Is China Guilty of Category Fraud?

With movie awards season around the corner, some entertainment pundits may use the term “category fraud” to describe races in…

This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Combination column and line chart comparing recent holiday spending by U.S. consumers. Chart subtitle: Spending is on track to reach record levels this holiday season, despite mounting economic pressures faced by American consumers. Chart source: Adobe Analytics and CNN Business as of October 31, 2023. Chart description: Left Y-axis is labeled “Spending” and ranges from $0B to $250B. Right Y-axis is labeled “YoY Growth” and ranges from 0% to 50%. X-axis labels each column: 2019, 2020, 2021, 2022, and 2023 (Projected). Holiday Spending by U.S. Consumers is plotted in dark teal columns. Holiday Spending Growth is plotted with light purple line and markers. 2019 saw $143B in spending and 13.1% YoY growth; 2020 $188B, 32.1%; 2021 $205B, 8.7%; 2022 $212B, 3.5%, and 2023 is projected at $222B and 4.8%. End chart description. See disclosures at end of document.

11.30.2023

‘Tis the Season to Spend!

The holiday spending frenzy is well underway as some of the biggest shopping days of the year, including Black Friday…

11.16.2023

The Taming of the VIX

October proved tumultuous for investors as all major U.S. equity indices were negative and the CBOE VIX Index, which serves…

This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Combination stacked column and line chart comparing unrealized gains/losses with effective federal funds rate. Chart subtitle: Unrealized losses across depository institutions have increased in recent quarters thanks to higher interest rates. Chart source: Federal Deposit Insurance Corporation and Federal Reserve Bank of St. Louis as of June 30, 2023. Chart description: Left Y-axis is labeled “Unrealized Gains/Losses” and ranges from -$800B to +$800B, corresponding to stacked columns. Right Y-axis is labeled “Rate” and ranges from -6% to +6%, corresponding to line. X-axis ranges from 1Q08 to 2Q23; labels are at 3-quarter increments to fit so last label is for 1Q23. Available-For-Sale Securities are plotted in dark green base of stacked columns; Held-To-Maturity Securities are plotted in lighter green as second half of column. Effect Federal Funds Rate line is plotted in light blue. Unrealized losses are at significant levels for chart losses; since the fed funds rate has increased since 1Q22, losses have totaled over $300B. Most recent datapoints, as of 2Q23 are as follows: Available-For-Sale Securities at -$248.9B, Held-To-Maturity Securities at -$309.6B, and Effective Federal Funds Rate at 5.3%. Please contact us for the full dataset. End chart description. See disclosures at end of document.

11.08.2023

Realizing the Impact of Unrealized Losses

Earlier this year, the regional banking crisis and eventual collapses of Silicon Valley Bank, Signature Bank, First Republic Bank, and…

This chart description is for illustrative purposes only and its accuracy cannot be guaranteed. Please see full disclosures at end of PDF document in the web post. General description: Three-line chart showing cumulative return for various U.S. equity indices. Chart subtitle: Domestic stock indices enter correction territory after recent slide. Chart source: Bloomberg as of October 31, 2023. Chart description: Y-axis is labeled “Cumulative Return” and ranges from -15% to +10%. X-axis is labeled in monthly increments, from Jun-23 to Oct-23. Data ranges 6/30/23 through 10/31/23. S&P 500 Index is plotted in orange line, Nasdaq-100 Index in light tan line, and Russell 2000 Index in dark purple line. Most recent data points, respectively, -5.31%, -4.84%, -11.61%. Please contact us for the full dataset. End chart description. See disclosures at end of document.

11.01.2023

The Chart for Red October

U.S. equities declined for the third consecutive month in October amid an environment of higher yields and underwhelming earnings reports…

10.13.2023

3Q 2023 Market Insights Video

This video is a recording of a live webinar held on October 26 by Marquette’s research team, featuring in-depth analysis…

More articles

Subscribe to Research Email Alerts

Research Email Alert Subscription

Research alerts keep you updated on our latest research publications. Simply enter your contact information, choose the research alerts you would like to receive and click Subscribe. Alerts will be sent as research is published.

We respect your privacy. We will never share or sell your information.

Thank You

We appreciate your interest in Marquette Associates.

If you have questions or need further information, please contact us directly and we will respond to your inquiry within 24 hours.

Contact Us >