Consumer Spending Optimism Jumps to Highest Since 2015
U.S. consumers are growing more positive about the year ahead, a monthly survey shows, with interest in spending reaching the highest level in more than five years amid increased optimism about finding and keeping a job.
Households surveyed by the New York Federal Reserve Bank last month said they planned to spend a median of 4.22% more in the coming year, the most they anticipated in any month since June 2015. In December, they expected to spend 3.42% more in the coming year. In the survey’s seven-year history, there’s only been a bigger one-month jump recorded once.
Although expectations for earnings growth continued to hover near 2% for a sixth straight month, job fears eased. The average perceived probability of losing a job in the next 12 months fell to 13.6% in January from 15% in December, hitting the lowest level since September 2019—prior to the COVID-19 pandemic. The expected probability of finding a job also ticked up, increasing to an average of 49.5% from 46.2% in December.
The latest figures reflect optimism that new COVID-19 vaccines will finally mean a return to some kind of normal life. Once we reach herd immunity, more businesses can reopen, jumpstarting hiring, said Sam Bullard, senior economist at Wells Fargo Securities. Plus, if another stimulus package is passed, people will have more money in their pockets, said Bullard, who predicts the economy will see the strongest growth in the second half of the year.
“With the vaccine getting out, folks are finally seeing the light at the end of the tunnel after being in this mess for a year now,” Bullard said.
All age groups increased their expectations for spending, but the biggest jump was among those younger than 40, the survey showed.
The survey is a nationally representative, internet-based survey of 1,300 heads of household. Respondents participate in the panel for up to 12 months.