Spending Drifted Lower in September Amid Widespread Supply Constraints

The following analysis is based on Morning Consult’s proprietary personal finances, purchasing intentions and price expectations data series. Read more from our October 2021 U.S. Consumer Spending Report.

Morning Consult’s October 2021 U.S. Consumer Spending Report shows that average consumer spending declined in September as summer vacations ended, supply chain disruptions persisted and expiring unemployment benefits drove down incomes. The report also highlights consumers’ burgeoning resilience against pandemic shocks, with more consumers re-engaging in pre-pandemic behaviors like shopping in person and taking public transportation. The report paints a picture of a temporary setback in average spending combined with a transition away from pandemic spending patterns.

Spending declined as falling incomes made consumers more frugal

Consumers’ average spending levels have moved in tandem with reported monthly incomes this year. When incomes fell in September as a result of seasonal turnover and expiring unemployment benefits, so too did total spending. Seasonal factors were especially evident in lower spending on discretionary categories like hotels, cars and gas, restaurants and airfare — many of which benefited from pent-up demand over the summer months. The drop in income is likely to be temporary as the strengthening labor market compensates for diminished government transfers. Weekly pay losses are declining, job openings remain close to all-time highs and a rising tide of job seekers re-entering the labor force is poised to drive growth in employment and wages.

Delta variant did little to discourage in-person shopping

The delta surge drove up daily cases to their highest level since January, but U.S. consumers appeared undeterred with regard to activities such as in-store shopping. Consumers reported more frequent trips to the grocery store in August and September than they had in any prior month this year besides May, while online grocery orders per month have trended down from 2.4 in March to 1.9 in September. The pattern held for alcohol purchases and restaurant meals as well, with households showing an increasingly robust preference for more frequent in-person purchases relative to online or pickup orders compared with January.

Supply chain issues and affordability continue to suppress spending

Housing, groceries and car-related costs are the three largest expenses for consumers, and all of these categories are seeing rising prices and supply-side constraints. At least 1 in 4 adults who shopped for a new or used car last month reported difficulty finding one, and over a third of consumers seeking housing or certain grocery items faced procurement challenges.

Cooling demand for certain items may ease supply-side pressures: Monthly outlays on car payments and gasoline fell 8.1 percent in September, while public transportation was the only spending category that recorded an increase last month. The switch away from increasingly expensive car travel is likely to continue as more workers return to offices and resume their pre-pandemic commutes. Price expectations for housing and groceries have also declined slightly since August.

Still, the myriad supply chain challenges facing a broad range of categories have yet to dissipate. Persistent bottlenecks will continue to prevent spending from reaching its full potential as high prices alienate buyers and empty shelves lead to lighter shopping bags.

Conclusion:

The recent decline in average spending was due to multiple factors, most of them transient. On the demand side, seasonal impacts and lower income levels are poised to flip from limiting factors to positive drivers of growth: Holiday demand has yet to fully manifest, with more than half of adults who plan to buy gifts reporting they haven’t started shopping, and the rising number of job seekers and job switchers are poised to lead to higher employment and stronger wage growth, enabling more spending.

Even as demand gains steam, supply chain bottlenecks are likely to persist into 2022 even after wage income increases, putting pressure on retailers to mitigate the factors that are currently discouraging buyers. As availability and affordability become ever more critical to consumers, businesses that can minimize supply chain challenges have an opportunity to capture a larger share of demand.

Sources:

U.S. Consumer Spending and Personal Finances Survey

The consumer spending and personal finances survey is intended to gauge consumers’ spending patterns and the health of household balance sheets. It typically acts as a leading indicator for credit card payments and retail sales, as well as providing insight into spending allocation well ahead of other data sources. Respondents are asked recurring questions on topics including household income, spending, savings, debt, housing payments and life events. Policy-related questions on respondents’ experiences with government programs such as stimulus payments or child tax credit distribution are included on an ad-hoc basis. The survey is conducted monthly among a representative sample of 2,200 U.S. adults. The survey was first run in September 2020, with some additional questions added in subsequent versions. Data is collected during the first week of each month, with questions pertaining to the previous month.

Geopolitical Risk Survey

The geopolitical risk survey measures major geopolitical and economic trends across the world’s largest markets, as well as providing insights into hot-button issues and early signals for policymakers in the public sector and decision-makers at multinational firms. It asks questions around inflation and purchasing behavior, price expectations, financial resiliency, housing, ESG, business climate, national security, and trust in political figures and institutions, both within and outside of the respondents’ home country. The survey is conducted on a monthly basis among representative samples of 1,000 adults from 15 countries, including the United States. The survey was first run in January 2021. Data is collected in the last week of each month.

Starting in September 2021, the geopolitical risk survey asks adults across 15 countries which products they are having difficulty procuring and how they have adapted their buying behaviors when faced with delays and shortages.