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U.S. consumer spending on basic and essential goods and services such as clothing, food, housing, transportation, and utilities rose to a record proportion of household incomes, according to a December survey by the Federal Reserve Bank of New York.
Spending on cars, furniture, home repairs, and other major expenses had dropped, consumers reported.
Households surveyed also are less likely than previously to make major purchases in the four months ahead.
Households’ reprioritized spending plans reflect our “Top 2022 Trend” of self-sufficiency: consumers are trimming expenses and conserving funds so they can better weather the next financial crisis.
Fewer than one household in five—less than 20 percent—are planning to spend for a vacation this year, compared with 27.8 percent in August 2020 and 25.2 percent in December 2019.
The survey also found a record gap between planned spending on “must have” versus “want to have” items.
Although shoppers are spending a little more at grocery stores, the number of items in the typical shopping cart has fallen, according to data service IRI, with consumers foregoing snacks, cut flowers, and bottled water, among other frills, Bloomberg noted.
Also, consumers are switching from name brands to generic or store-brand versions of the same products, IRI found, and shopping more at discount food stores such as Aldi and Lidl.
Beef and pork, among the most costly meats, have seen prices rise fastest and sales decline quickly, with consumers choosing poultry, prices for which have been rising more slowly, Bloomberg said.
TREND FORECAST: Consumers will be spending less as inflation keeps its steady pace. Therefore, even when inflation comes down from its 40 year highs, it will still be higher than wage gains, thus putting more downward pressure on consumer spending. And as we forecast, should Brent Crude oil prices spike above $100 per barrel, it will bring down consumer spending.