Rising Consumer Sentiment Fueled Spending Behavior In Q2 2021
U.S. consumers reportedly spent more and cut back less in second quarter 2021, buoyed by vaccinations, widespread re-openings and a government stimulus. According to the U.S. Consumer Dynamics Report for second quarter, drawn from The Conference Board Global Consumer Confidence Survey, eight percent of respondents had no spare cash to spend in second quarter, down from 17 percent in the first quarter. This bodes well for near-term spending.
While 54 percent still report cutting back on expenses in second quarter, there are fewer doing so compared with 62 percent in this year’s first quarter and 64 percent a year ago. Also, the number of people spending disposable income on discretionary categories was up sharply, especially for services such as vacations/travel and out-of-home entertainment, but also for clothes, home improvement and technology. At the same time, investing in stocks/mutual funds—a trend that coincided with less spending during the pandemic as well as stimulus payments—continued to climb as other spending opportunities reopened.
“Overall, second quarter saw U.S. consumers’ pandemic-fueled concerns about health, the economy and job security ease,” says Denise Dahlhoff, senior researcher at The Conference Board. “At the same time, people’s worry about climate change, which was temporarily eclipsed by pandemic-related concerns, has resurfaced. Given extreme weather events across the world, this concern may continue rising going forward, challenging companies to enhance and accelerate their sustainability agenda and collaborate with industry peers—and governments—to find solutions.”
The report shows that 16 percent of consumers named the economy their top concern over the next six months—still the highest overall, but down nine points compared to first quarter. The proportion naming health (14 percent) and job security (nine percent) as their top concerns also fell in the second quarter, down by four points and one point, respectively. Global warming, however, was the top concern of seven percent of U.S. consumers in the second quarter—up two points over the first quarter and four points year-over-year.
The Conference Board notes that U.S. consumers’ concerns regarding the climate aligns with renewed government focus on the issue, and is mirrored elsewhere around the world. In Germany, 12 percent of consumers named global warming their top concern in the second quarter, up five points over the first quarter. Japan, Italy, Vietnam, Singapore and Mexico all posted three-point gains in the proportion of consumers prioritizing climate. Efforts around sustainability may increasingly take center stage in the months and years ahead, given that climate change is a topic of growing attention globally.
Inflation concerns about food, fuel and utilities have risen but are still below pre-pandemic levels. Higher expenses on necessities may impact spending on discretionary categories, particularly for households with lower incomes and those who suffered financial losses from the pandemic. The recent resurgence of consumer spending has elevated concerns about personal debt, although the six percent naming it their top concern in the second quarter remains below pre-pandemic levels.
The share of consumers spending on discretionary categories was up across the board in second quarter 2021, while investing continued to go mainstream. One in five Americans put money into investments in second quarter—a peak level fostered by low interest rates, record stock-market performance and stimulus payments. While the growth of retail investing was fueled earlier in the pandemic by a dearth of alternatives to spend on, the trend continued in the second quarter even as spending elsewhere rebounded.
Services categories saw the greatest boost in the second quarter, as pandemic mobility restrictions and capacity limits eased. Thirty-two percent of consumers reported spending on holidays/vacation travel, up seven points from first quarter. Similarly, 19 percent spent on out-of-home entertainment, up six points. Spending across a range of goods also grew strongly as many people want to refresh their wardrobe and have the financial means, even for bigger-ticket items. In the second quarter, 27 percent of consumers reported spending on new clothes—up four points, 26 percent spent on home improvements/decorating—up five points and 18 percent spent on new technology products, up five points.