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- The Bain/Dynata Consumer Health Indexes (CHI) headline gauge of prospects for US consumers across all income groups fell 0.8 points in November, to 99.4.
- The CHI outlook score for lower-income Americans (those earning below $50,000 per year) extended its five-month slide in November, dropping 0.5 points to 95.6. While we have observed isolated lower readings for this metric in the past, the current six-month downtrend is worse than for any period except for the nine months following the onset of Covid-19.
- In recent months, we have highlighted growing signs of strain among lower-income earners, particularly regarding their outlook. As early as the summer, we noted that declines in our lower-income outlook score signaled a worsening labor market for these earners. Government reports (until the government shutdown began) confirmed our viewpoint, as a series of downward revisions to payroll data were announced.
- In parallel with the slide in the lower-income outlook reading, this group’s spending intentions have dropped sharply, plunging by 5.6 points to 94.7, well below the CHI’s neutral level of 100. To put this in the context of the Covid era, the low for our lower-income spending intentions gauge during the pandemic was 89.1. Another fall of this month’s magnitude would return this metric to the levels of spending intent pullback observed at the peak of the Covid-19 retrenchment.
- Sudden declines in spending intent have happened before in this lower-income series and have often quickly corrected back to a prior, more robust trend. What alarms us this month is that the decline in spending intent occurred alongside a large fall in the lower-income group’s intent to save. This measure fell by 3.1 points to 88.8 this month, its lowest level of the last two years, leaving it just 4 points above the Covid-era all-time lows for this series.
- This concurrent fall in saving intent suggests the spending intent decline is more than merely a “blip” from a single data series but rather signals weakness among lower-income consumers. We believe this weakness, which is confirmed by recent high-profile earnings calls, suggests that when the government begins releasing official data series once again, the news will not be good.
- Looking across this month’s data, one might initially conclude that the US consumer is “holding up,” if in a slight negative downtrend. But this oversimplifies the situation. While upper- and, to an extent, middle-income consumers are indeed holding up, our readings for lower-income earners are in serious decline.
- For businesses, this divergence across income groups increases the importance of knowing the source of their revenue and demand. To what degree is revenue, or its components, dependent on lower-, middle-, and upper-income consumers? A clear view of this breakdown can help companies drive clear-eyed planning and scenario building for the holiday season and beyond.
Bain and Dynata created the Consumer Health Indexes in 2017 to support business decision makers in their near- and midterm planning for their businesses. To achieve this, we have been asking questions that are within the expertise of the people taking our surveys. What are their personal spending plans? What are their saving plans? What is their use-of-debt plan? These are direct, easily understandable questions about survey respondents’ near-term expected behaviors. They require little interpretation, macroeconomic expertise, or filtering through the lens of the political or news cycle. Since 2017, our clients have been using our Consumer Health Indexes as a differentiated data point relative to existing confidence indicators.
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