U.S. Consumer Spending Trends 2023

In Collage Group’s Spring 2023 Financial Services report, our dedicated team of consumer research professionals found that 30% of the total population felt ‘bad/very bad’ about their financial situation. With 59% of Americans stating they ‘worry often’ about their financial situation, and their financial future. 

In this article, Collage Group unpacks this data to provide specific insights on diverse America and discerns how consumers are adapting to America’s current economic conditions by highlighting disparities in spending based on gender, ethnicity, and age. Read below for actionable strategies to help brands effectively address current consumer spending trends through three major economic stressors: Inflation, recession fears, and the return of the student loan.

1. Three Key Stressors Contributing to the “Bad Vibes” Economy
2. Consumer Spending Trends Across Gender, Ethnicity, and Age

Three Key Stressors Contributing to the “Bad Vibes” Economy

Inflation, recession fears, and the resumption of student loan repayments are burdening both households and businesses. This is affecting consumer spending patterns, corporate earnings, and creating a challenging economic landscape. These pressures contribute to what some refer to as a “bad vibes” economy.

Below, we elaborate on the three primary economic pressures consumers currently face.

Stressor #1: Inflation Is Coming Down but Consumers Don’t Feel It

The Consumer Price Index (CPI) is a metric that monitors the average price changes of goods and services commonly bought by households. CPI offers valuable insights into inflation and the cost of living.

Year-over-year CPI inflation hit a 40-year high of 9.1% in June 2022. Certain items in this year experienced rapid price growth, with notable examples including food at schools (+305%), eggs (+59.9%), margarine (+43.8%), fuel oil (+41.5%), and airline fares (+28.5%). This has had a significant impact on consumers, with 54% of Americans stating food costs to be their top financial concern.

How does this compare with inflation rates today?

In contrast to the 2022 spike, CPI inflation has receded over the past year, reaching 3% in June 2023. However, despite this decline, consumers still aren’t experiencing the positive effects of easing inflation.

For instance, coming back to our Financial Services research presented at the beginning of this article, the majority of Americans worry about their financial situation today and in the future, and one-third describe their current financial situation as bad. Plus, 78% stated they were concerned the prices of goods and services will increase over the next 12 months.

Yet, despite this sentiment, as of May 2023, personal income in the United States observed a 0.4% rise, as reported by the Bureau of Economic Analysis. Disposable personal income (DPI) – personal income after tax deductions – also grew by 0.4%. Additionally, personal consumption expenditures (PCE) – consumer spending on goods and services – saw a slight increase of 0.1%. Notably, retail spending showed a 0.2% upswing from May to June, with consumers amplifying their expenditures at electronic, furniture, and home furnishing stores. Online sales similarly displayed a robust rise. 

Hence there seems to be a disparity between:

1. How consumers feel about current CPI inflation rates and their financial situation;
2. Actual inflation rates and disposable income;
3. Consumer spending behavior, with consumers spending more despite feeling the pinch.

Hence, it’s important we unpick the data, to truly understand how your consumers are reacting to recent economic challenges. With this in mind, College Group has undertaken an in-depth analysis of U.S. consumer spending patterns to draw more precise conclusions, pinpointing trends across distinct consumer segments. Keep reading to find out more.

Stressor #2: The Fear of a Recession Could Cause a Recession

Increasing interest rates, and an unexpected banking crisis are cited as the primary reasons for an expected recession in the U.S. The Federal Research Bank of New York reports a 60.8% likelihood of a U.S. recession occurring within the next 12 months – which is the highest recorded value in over a decade.

As a result, there’s growing concern among consumers regarding their job and employment situation. For instance, a 2023 Deloitte financial well-being index study revealed the number of consumers expressing such concerns grew from 18% in February to 25% in May. Research by Collage Group supports these findings, with younger generations particularly concerned about their job security (21% of Millennials and Generation Z report losing their job is their top financial worry).

Millennials are individuals born between the early 1980s and late 1990s. Generation Z are individuals born between 1996 and 2010.

These heightened concerns regarding job stability mean consumers are adopting a more cautious spending approach, which is reducing overall consumer demand. Consequently, we’re witnessing a self-fulfilling prophecy in action, where the fear of a recession itself could contribute to a recession.

Stressor #3: The Return of Student Loan Repayments Is a Significant Financial Stress for Younger Generations

The financial services firm Jefferies estimates that the return of student loan repayments will cost U.S. consumers $18 billion a month by September, potentially slowing down an already pressurized national economy. This is estimated to hinder economic growth by 0.2% in the final quarter of 2023. The impact will be felt by 17.6% of the U.S. population, especially millennials who’ll lose 6.5% of their spending power as repayments resume. 

According to our research findings, the resurgence of student loan repayments is a source of significant worry for younger generations. Specifically, 23% of Generation Z individuals have identified this as their foremost financial concern. Moreover, our study reveals that younger generations are not only anxious about their own job stability but also harbor concerns about the job security of their spouses, with 15% of Millennials and 13% of Generation Z sharing these apprehensions.

Collage Group wanted to understand how inflation, recession fears, and the resurgence of student loan repayments are impacting consumer spending within diverse America.

In pursuit of this, we’ve reviewed the latest trends revealed by our own primary research to give unique insights segmented by gender, ethnicity, and across generations.

Partner With Collage Group to Access the Latest Trends in Consumer Spending

Collage Group’s comprehensive consumer research platform reveals the nuances of consumer spending trends across demographics. 

Gender-specific trends show distinct responses to economic pressures, with men and women adjusting their spending behaviors in different ways. Ethnicity-based variations highlight the unique concerns and strategies of Hispanic, Black, and Asian American consumers. Similarly, generational differences underscore how Generation Z, Millennials, Generation X, and Baby Boomers are each navigating today’s economic challenges.

These findings provide brands with valuable insights to tailor their strategies and offerings to align with consumer needs and priorities. As the economy continues to evolve, businesses that adapt to these consumer spending trends and effectively address the challenges of what has been termed as the “bad vibes economy” will be better positioned to build stronger relationships with their customers and thrive in the ever-changing economic landscape. 

That’s why having the ability to access current consumer research is crucial for any business aiming to stay relevant. Working with Collage Group, you’ll unlock entry to our leading consumer insights software solution, fluen.ci. Our members get instant access to the deepest, most actionable, and freshest cultural insights to win over diverse American consumers.

Contact us at the form below to learn more about how you can gain access to these diverse consumer insights and much more in our Cultural Intelligence Platform.