Spending outlooks for both middle- and upper-income American households are falling, according to the latest Bain & Co./Dynata Consumer Health Indexes. The most concerning aspects of today’s economy for those groups are increased risks in the housing market and a sell-off in the stock markets, respectively.
The Consumer Health Indexes (CHI) consumer outlook score for middle-income Americans fell for a third month in a row in March, while the CHI outlook gauge for the critical upper-income group – which accounts for more than 50% of U.S. discretionary consumer spending – fell for a fourth consecutive month.
The declining outlooks for both groups cast a further shadow over the U.S. consumer, the Bain/Dynata analysis suggests, following the rise in American’s savings intentions highlighted in the CHI report for February which suggested consumers could revert to pre-pandemic norms of lower spending and higher savings.
“We suspect some middle-income earners are growing increasingly wary of the housing market in their metros – consistent with recent reports of inventories spiking in some markets ahead of the summer selling season,” said Brian Stobie, Senior Director in Bain & Co.’s Macro Trends Group. “If the housing market falters in the coming months, the current downtrend in our middle-income outlook index could expand to middle-income spending, raising the prospect of a loss of demand in the broader economy,”
While housing is the key outlook driver for the middle-income group, equity markets are the main factor for the upper-income group.
But despite an ongoing downturn in the U.S. stock markets, the Bain/Dynata analysis reports that the current outlook gauge for upper-income Americans remains around the mid-range of levels during the last market correction between May 2022 and March 2023.
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“Since the upper-income outlook is tied to perceptions of future portfolio performance, market developments in the coming weeks will be a critical determinant of how things unfold,” said Stobie. “Our data indicates that caution, rather than panic, has taken hold for upper-income earners who are waiting to see next developments in markets.”
Click here for more from the Bain/Dynata report.
