Spending Growth Ended 2023 on a High Note, With Higher Earners Driving Most of the Gains

Consumers- especially high income households- continue to prioritize services
Getty Images / Morning Consult artwork by Ashley Berry
January 25, 2024 at 5:00 am UTC

Key Takeaways

  • Consumer spending strengthened at the end of 2023, with growth driven mainly by stronger services expenditures among higher income households.

  • Not all categories are benefitting equally from strong demand: Groceries and gas are being deprioritized relative to other goods.

  • While elevated interest rates are discouraging some consumers from taking on credit card or auto debt, more are leaning into BNPL.

This memo offers a preview of Morning Consult’s January Consumer Spending and Household Finance Report. Morning Consult Economic Intelligence subscribers can access the full report here.

Consumer spending expanded at the end of 2023, with services categories driving most of the growth. Improving purchasing power throughout most of the year has helped encourage demand amid higher and middle-income adults. On the other hand, lower income adults continue to feel the pinch of sustained price growth on many goods and services as well as higher debt servicing costs from elevated interest rates. 

Grocery and Gas Purchases Are Being De-Prioritized Compared to Other Goods

Share of retail sales at grocery stores and gas stations (left) share of real monthly goods spending allocated to groceries and gas (right)
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Source: Census Bureau (left), Morning Consult Economic Intelligence (right)

While services are commanding a growing share of overall spending, certain goods are being squeezed out of budgets more than others. Groceries and gas are staple purchases, but the share of spending consumers are devoting to these categories is shrinking – even as price relief makes gas and certain food items more affordable.

The Census Bureau’s retail sales data shows that grocery stores and gas stations have been receiving a declining share of total consumer retail spending. Morning Consult’s data helps to explain why: In contrast to other goods categories, Consumer Purchasing Power Barometer scores for groceries and gas declined over the past year. Demand for these categories appears to be weakening as consumers increasingly prioritize other purchases.

Middle-income adults reported the largest decrease in the share of goods spending allocated to groceries and gas. As this group’s spending patterns have increasingly mimicked high earners, discretionary purchases like flights and dining out may be crowding out meals at home and car trips. Low-income adults had the smallest decline in grocery and gas budget allocations, as this group has less flexibility to “trade up.”

Lower Income Adults Are Holding Back Restaurant Spending Recovery

Percentage change in real monthly restaurant spending as of Dec. ‘23, by annual household income
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Morning Consult Economic Intelligence

The Census Bureau reported strong annual growth in restaurant sales (11.1%), even after accounting for the impact of inflation, which grew 5.2% year-on-year for food away from home. However, the National Restaurant Association’s Restaurant Performance Index (RPI) has been more subdued, with its Current Situation index ending just below 100 (signaling a slight contraction). The RPI is more aligned with Morning Consult’s restaurant spending data. 

The RPI includes customer traffic in its calculation, and Morning Consult’s spending data captures spending by the average consumer – not the high-end outliers disproportionately contributing to retail sales. Lower earners appear to be holding back overall spending levels, substantially cutting back restaurant purchases in 2023. The middle-income group, meanwhile,  is showing the strongest expansion in spending on dining out, while de-prioritizing grocery purchases.

A headshot photograph of Kayla Bruun
Kayla Bruun
Senior Economist

Kayla Bruun is a senior economist at decision intelligence company Morning Consult, where she analyzes consumer spending, inflation and household finance trends, leveraging the company’s proprietary high-frequency data.

Prior to joining Morning Consult, Kayla was a key member of the corporate strategy team at telecommunications company SES, where she produced market intelligence and industry analysis of mobility markets. 

Kayla also served as an economist at IHS Markit, where she covered global services industries, provided price forecasts, produced written analyses and served as a subject-matter expert on client-facing consulting projects. 

Kayla earned a bachelor’s degree in economics from Emory University and an MBA with a certificate in nonmarket strategy from Georgetown University’s McDonough School of Business.

Follow her on Twitter @KaylaBruun. For speaking opportunities and booking requests, please email [email protected]

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