US Consumers Projected to Continue Spending Despite Financial Pressures

ByDayne Lee

Feb 10, 2024

Despite concerns over increasing credit-card debt and a recent wave of layoffs, American consumers are expected to maintain, or even boost, their spending in 2024. This prediction is supported by a Bloomberg Markets Live Pulse survey, where more than half of the respondents foresee continued robust expenditure on activities such as travel, dining out, and attending concerts. The optimism aligns with the latest jobs report, highlighting rising employment and wages.

Contrasting Signals from the Labor Market

Despite positive employment trends, the labor market has shown signs of strain, with notable companies announcing layoffs in efforts to bolster profits. Nonetheless, with wages now outpacing inflation, many investors anticipate a repeat of last year’s spending resilience, which defied expectations for a downturn.

The survey revealed a divided outlook, with approximately 45% of participants expecting a slowdown in consumer spending, citing potential job losses and changing purchasing habits as contributing factors. This caution is reflected in the broader economy, where some businesses anticipate a more conservative consumer behavior, while others report unchanged spending patterns.

Retailers Adapt to Consumer Bargain Hunting

Retail giants like Amazon and Walmart may benefit from sustained consumer spending, but the search for discounts could pressure most consumer companies to opt for cost reductions, including layoffs, rather than price increases to protect profits.

Consumer Confidence and Spending Patterns

Consumer sentiment has improved significantly, buoyed by cooling inflation and sustained low unemployment. However, challenges remain as families adjust their spending in response to high prices. Nonetheless, income growth outstripping inflation bolsters household budgets, especially for discretionary spending on experiences.

Credit Use and Payment Challenges

The use of credit and buy now, pay later schemes has surged, supporting consumer spending amidst economic uncertainties. However, rising delinquency rates on credit card payments indicate growing financial strains among American households, raising concerns about the sustainability of debt-fueled consumption.

While most survey respondents anticipate a gradual increase in consumer delinquencies and defaults, a significant acceleration in financial distress is not widely expected. However, the economic conditions that fueled last year’s robust spending may not be as potent in 2024, suggesting a moderation in consumption growth.

Featured image credit: Brett Critchley via Dreamstime

Dayne Lee

I have a background that includes experience as a day trader in the financial sector before transitioning into my current role as an editor. My focus is on ensuring our stories are accurate and engaging for our readers, and I enjoy collaborating with our writers to provide the best news coverage possible. This journey from finance to writing has been both challenging and rewarding.