By Becca Coggins, Christina Adams, Kari Alldredge, and Warren Teichner
In the third quarter of 2024, optimism in the US economy grew to its highest level in a year. Nevertheless, many of the same dynamics that have characterized consumers’ feelings in the past year—including a cautiousness toward spending and a simultaneous willingness to splurge—remain evident. We also observe some growing gaps among demographic groups: for example, younger consumers report significantly higher optimism than older consumers, while male and female respondents in our survey report feeling differently about the economy.
The following five charts showcase findings from our latest ConsumerWise survey, which was conducted in the United States from late July 2024 through the first week of August.
I’m starting to see prices stabilize. I don’t see items I use every day going up, and a lot of stores have lowered prices on everyday items. So, I think inflation for the moment is stabilizing, and we’re on the downward trajectory.
As someone who’s very price-conscious and struggling with increasing prices, I’ve really been working hard to look for sales and promotions at various stores. I shop around at multiple websites and multiple stores to try and get the best deals and save the most money that I can, which sometimes results in forgoing certain items.
I’ve been having good results. . . . That will cause me to splurge a little bit, because it makes me confident that I’m getting some extra money, and it’s a little different from earlier in 2024, because I didn’t have as much money.
In the third quarter, US consumers report higher optimism, buoyed by greater faith in their household finances, which translates into a greater willingness to spend. As keen market watchers already know, emerging economic indicators could dampen this newfound optimism. While we expect the observed differences between demographic groups to remain through the end of the year, the next few months may be turbulent. Market uncertainty, the upcoming US general election, and ongoing geopolitical conflicts may test US consumers’ faith in the economy.
Watch this space for regular updates on the state of the US consumer. To contact us for more information or to read additional insights, check out our ConsumerWise page.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams is a partner in the Dallas office, Kari Alldredge is a partner in the Minneapolis office, and Warren Teichner is a senior partner in the New York office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Christina Anderson, Christina Sexauer, Eitan Urkowitz, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
An update on US consumer sentiment: Are consumers on the cusp of a shift?
By Christina Adams, Kari Alldredge, Lily Highman, and Sajal Kohli
US consumer confidence dips as inflationary concerns intensify. Here’s the latest research from our ConsumerWise team.
In the second quarter of 2024, US consumer optimism fell, mirroring levels seen at the end of 2023. Economic pessimism grew slightly, fueled by concerns over inflation, the depletion of personal savings, and perceived weakness in the labor market. These concerns left consumers somewhat conflicted: on one hand, they continued to splurge on food and apparel, but they pared back spending in other areas. This contradictory behavior is most evident with Gen Zers, who traded down and splurged at higher rates than other consumers.
The following five charts highlight the findings from our latest ConsumerWise research in the United States.
We have so little money to spend on everything as it is with inflation and gas prices and grocery prices so high, we just don’t have the money for anything else. I don’t see that changing anytime soon, and I don’t see us in a position to buy a whole lot of extras at this point.
We’ve always been very frugal in the way we spend our money, but we have become even more vigilant. We have cut back on things we don’t need, we have bought less things to stock up on, and we have made do with what we have on many occasions.
I’m planning on treating myself to a vacation, and that’s where my money is going. This is a vacation I haven’t had in about four years, so I have saved enough just for that.
The United States may be seeing evidence of consumers on the cusp of a shift as optimism about the economy declines, trade-down behavior continues, and consumers pull back their spending on nonessential goods. Watch this space for regular updates on the state of the US consumer. To contact us for more information or to read additional insights, check out our ConsumerWise page.
ABOUT THE AUTHOR(S)
Becca Coggins is a senior partner in McKinsey’s Chicago office, Christina Adams is a partner in the Dallas office, Kari Alldredge is a partner in the Minneapolis office, and Warren Teichner is a senior partner in the New York office.
The authors wish to thank Andrea Leon, Andrew Pitakos, Eitan Urkowitz, Heather Gouinlock, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
Consumers see a brighter future ahead
By Christina Adams, Kari Alldredge, Lily Highman, and Sajal Kohli
Reaching a two-year peak, US consumer optimism moved the needle on reported spending habits. Here’s the latest research from our ConsumerWise team.
In February, concerns about inflation decreased slightly from the previous quarter, which helped consumer optimism about the US economy reach its highest level in almost two years. Although US consumers felt less pressure to save for an eventual rainy day, 20 percent were still pessimistic about the economy—but this represented the lowest reported pessimism rate since June of 2022 (although consumers were still more pessimistic than they were at the beginning of the COVID-19 pandemic). The following five charts highlight the findings from our latest ConsumerWise research in the United States.
My confidence has gone up when it comes to the state of the economy. There’s been a lot of positive change overall as the stock market has gone up, my personal portfolio has gone up, and we’ve seen more positive talk about the economy. Even spend at my local store seems to be higher.
We’ve been shopping at the grocery store more often to buy things that are healthier for us. And in the process, we get to save money and spend time with each other cooking and eating together. So it’s really a win–win for everybody.
Unlike 2022 and 2023, I’m no longer delaying purchases. Once the new year came, I just started going down my list and buying the things I’ve been planning. It’s all about finding the best deals possible.
I plan to splurge on myself every now and then. Some of the things I’m most excited to buy are new makeup, new clothes heading into the new season, and even being able to travel to try new foods. I definitely think it’s important to have a healthy balance, and splurging helps to enjoy life a lot more.
I’ve gotten really into cooking and like to splurge on cheeses at the grocery store. We definitely cook a lot more than eating out and like to go to specialty grocery stores to buy different ingredients for cooking at home.
As inflation figures continue to fluctuate, will consumers continue to gain confidence in the economy and, therefore, continue to express an interest in splurging? Or will higher-for-longer interest rates slow spending? Watch this space for regular updates on the state of the US consumer. Check out our ConsumerWise page, and contact us for data from previous updates or additional insights.
ABOUT THE AUTHOR(S)
Christina Adams is a partner in McKinsey’s Dallas office, Kari Alldredge is a partner in the Minneapolis office, Lily Highman is a consultant in the New York office, and Sajal Kohli is a senior partner in the Chicago office.
The authors wish to thank Isabelle Engelsted, Alex Lequerica, Andrew Pitakos, Tom Skiles, and Eitan Urkowitz for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
Caution heading into 2024
By Christina Adams, Kari Alldredge, Sajal Kohli, and Eitan Urkowitz
US shoppers are keeping a watchful eye on their spending as uncertainty about the world around them persists. Here’s the latest research from our ConsumerWise team.
Despite inflation slowing considerably from its mid-2022 peak, consumers still expressed caution in November about overspending, given lingering uncertainty about the economy and geopolitical tensions. Consumers said they are planning to reduce their overall spend, being more selective in the products they purchase and places they splurge. The following five charts highlight the findings from our latest ConsumerWise research in the United States.
I’m very concerned about the country’s economy, especially over the last year and the last three to six months. We still have very high gas prices. We still have very high prices for food and services and just about everything else, and it makes it harder on people who are retired.
I’ll be spending more on essentials just because prices are up. I don’t intend to buy any more than the usual, but with prices continuing to change, I just predict I’ll be spending more than I do now. This is the general way all prices are right now, and I don’t expect it to change or get better anytime soon.
If I have the option to have the money in my hands and be investing and using it, I’m going to make my money work for me. I don’t want it to just go toward a full payment right away. If I have the option, I’m going to use buy now, pay later. That’s why I use credit cards. I don’t plan to have debt, and I make sure there’s zero interest. That’s what I do.
Will US consumer sentiment trend up or down as we head into the new year? What will that mean for manufacturers and retailers as they finalize their 2024 strategies? Watch this space for regular updates on the state of the US consumer. Check out our ConsumerWise page, and contact us for data from previous updates, more information, or additional insights.
ABOUT THE AUTHOR(S)
Christina Adams is a partner in McKinsey's Dallas office, Kari Alldredge is a partner in the Minneapolis office, Sajal Kohli is a senior partner in the Chicago office, and Eitan Urkowitz is a communications specialist in the Washington, DC, office.
The authors wish to thank Miranda David, Isabelle Engelsted, Andrea Leon, Alex Lequerica, Andrew Pitakos, and Tom Skiles for their contributions to this article.
This article was edited by Alexandra Mondalek, an editor in the New York office.
