US Households Expect Spending to Be Strong in 2021
Optimism about the future continues to be strong among U.S. consumers even as they continue to rein in spending, according to the results of the Federal Reserve’s latest survey.
Households asked in December 2020 about future spending said they expected to spend about 3% more in the next 12 months, the largest expected change in total spending since the Fed began monitoring it in August 2015. The jump—up from 2.2% in August, 1.6% in April, and 2.4% in December 2019—remained true across education and income groups in data released by the Federal Reserve Bank of New York Monday.
Consumers reported expecting all-time-high spending increases in essential items (4.1%) and non-essential items (1.6%) in the coming year. The Fed tracks median expected growth in household spending three times per year—in August, December, and April.
Expectations of buying a house or apartment rose 6.2% in December 2020, the largest increase since August 2016. The average likelihood of spending money on furniture, home repairs, vehicles, and even vacations in the next four months all increased in December compared with August 2020.
Economists have said that a high savings rate means consumer spending will likely jump going forward as more people receive COVID-19 vaccinations. The U.S. personal savings rate remains well above pre-pandemic levels but continues to decline from its April 2020 high.
Meanwhile, the survey showed a “relatively modest” median year-over-year increase in monthly spending at 1.6%, down from levels in August 2020 and December 2019. The decline was driven by respondents aged 40 to 60 and those with incomes below $50,000.