December 2020 Household Spending Survey Shows Sustained Rebound In Year-Ahead

from the New York Fed

The Federal Reserve Bank of New York's Center for Microeconomic Data released the December 2020 Survey of Consumer Expectations (SCE) Household Spending Survey, which provides information on individuals' experiences and expectations regarding household spending.

The survey shows a continuation of relatively modest monthly household spending growth compared to pre-pandemic levels. While the share of respondents who reported making a large purchase during the past four months has increased for most spending categories since April 2020, the share reporting spending on vacations dropped further to a new series' low. Year-ahead total household spending growth expectations instead rose sharply, continuing its rebound from the steep decline in spending expectations measured in April. Similarly, median year-ahead expected growth in non-essential and essential household spending both rose to new series highs. Expected spending responses to an unexpected 10% increase in income shows an average of 36.3% would be used to pay down debt, 44.5% would be saved or invested, and 19.3% would be spent or donated.

Experiences

  • The median increase in monthly household spending compared to a year ago was 1.6%, retreating from 1.9% in August while remaining well below its December 2019 reading of 2.5%. The decline from its August reading was driven by respondents aged 40 to 60 and by lower-income (below $50,000) respondents.
  • Some 54.6% of households in December 2020 reported making at least one large purchase in the last four months, slightly above the 54.0% reading in August and the second consecutive increase since the series reached its low in April 2020 of 50.7%. Despite the gradual increase, the proportion remains well below its December 2019 level of 62.5% and does so for all age, education, and income groups.
  • The proportion of households who made a large purchase in the past four months of electronics and vehicles increased in December 2020, approaching December 2019 levels. The share reporting purchases of home appliances, retreated slightly from its series high of 14.5% in August 2020, while the proportion reporting spending on vacations dropped to 8.4%, a new series low.
  • The reported degree of month-to-month variability in household income was relatively unchanged in December 2020 compared to its August reading, remaining elevated compared to December 2019. The proportion of households who reported their household incomes (before taxes) vary by less than 5% was 80.8% compared to 82.7% in a year ago. The share who reported that their incomes vary by more than 15% from month to month was 4.0% compared to 2.8% a year ago. The latter increase was greatest among younger (under 40) and lower-income (below $50K) respondents.
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