Many of the same dynamics that have characterised US consumers’ feelings in the past year—including a cautiousness toward spending and a simultaneous willingness to splurge—remain evident.

Younger consumers report significantly higher optimism than older ones. Gen Zers and millennials across income groups report higher rates of optimism compared with Gen Xers and baby boomers.

High-income consumers were more optimistic about the economy in Q3 than middle- and low-income consumers.

The McKinsey ConsumerWise survey was conducted in the United States from late July 2024 to the first week of August.

Male respondents note higher levels of optimism (47 per cent) compared with female respondents (37 per cent). Male respondents report feeling optimistic about an improved job market in Q3, while female respondents indicate feeling concerned over making ends meet.

While inflation has consistently dropped from its 2022 peak, 53 per cent of respondents still say rising prices and inflation are among their concerns. This may be due to an ‘inflation overhang’ or the idea that it takes consumers months, if not years, to adjust to new, higher prices even as inflation stabilises.

Thirty-seven per cent of respondents say stabilising inflation has made them feel more optimistic about the economy, up from 31 per cent in Q2. Several retailers have announced plans to lower prices on everyday items, which may be contributing to higher optimism.

Consumers indicated they planned to increase their spending on most essential, semi-discretionary and discretionary items over the next three months.

Consumers, especially Gen Z and millennials, continue to be price sensitive. Seventy-six per cent of consumers report trading down—that is, changing the type or quantity of purchases for better value and pricing—in the third quarter, consistent with earlier in the year; however, that figure rises ten per centage points, to 86 per cent, among Gen Zers and millennials.

Among these younger consumers, nearly 50 per cent report changing retailers for a lower price or discount, up from 44 per cent last quarter. Gen Xers report trading down at a lower rate than Gen Zers and millennials (76 per cent).

Unsurprisingly, low-income consumers report trading down more frequently than high-income consumers, an article on McKinsey website said.

Consumers report using buy now, pay later (BNPL) services more in Q3 compared with the second quarter. E-commerce sales events in July and back-to-school shopping may account for the growing use of these services.

In Q3, more consumers across income and age groups indicated an intent to splurge compared with Q2 (42 per cent versus 38 per cent). It’s likely that the increase in reported optimism contributed to these findings, the company observed.

Fibre2Fashion News Desk (DS)