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An Update on the Health of the U.S. Consumer

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Abstract
The strength of consumer spending so far this year has surprised most private forecasters. In this post, we examine the factors behind this strength and the implications for consumption in the coming quarters. First, we revisit the measurement of “excess savings” that households have accumulated since 2020, finding that the estimates of remaining excess savings are very sensitive to assumptions about measurement, estimation period, and trend type, which renders them less useful. We thus broaden the discussion to other aspects of the household balance sheet. Using data from the New York Fed’s Consumer Credit Panel, we calculate the additional cash flows made available for consumption as a result of households’ adjustments to their debt holdings. To detect signs of stress in household financial positions, we examine recent trends in delinquencies and find the evidence to be mixed, suggesting that certain stresses have emerged for some households. In contrast, we find that the New York Fed’s Survey of Consumer Expectations still points to a solid outlook for consumer spending.

Suggested Citation

  • Andrew F. Haughwout & Donghoon Lee & Daniel Mangrum & Jonathan McCarthy & Davide Melcangi & Joelle Scally & Wilbert Van der Klaauw, 2023. "An Update on the Health of the U.S. Consumer," Liberty Street Economics 20231018a, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:97183
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    File URL: https://libertystreeteconomics.newyorkfed.org/2023/10/an-update-on-the-health-of-the-u-s-consumer/
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    More about this item

    Keywords

    consumption; household finance; excess savings; forecasting;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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