December Consumer Dashboard

Here are the latest insights from Goldman Sachs Global Investment Research on the financial health of the US consumer today.

Consumer resilience continues as online spending grew solidly compared to last year – which is better than initially expected. Spending is driven by the week-long Cyber Week sales through Black Friday and Cyber Monday.

Our colleagues at Goldman Sachs Research analyzed the data and expect consumers will continue increasing their online spending in the months ahead. Let’s take a deeper dive into their analysis.

Spending

The latest economic data showed real consumer spending growth (adjusted for inflation) steadily rose to 2.2% year over year in October, roughly the same rate as in September. Nominal retail sales (unadjusted) dropped 0.1% in October month over month. However monthly core retail sales (excluding autos, gasoline, and building materials) increased by 0.1% in real terms despite the impact of student loan payments resuming in October on spending.

Cyber Week has shown resilience in consumer spending, where promotions played an important role in purchasing decisions especially with non-essential goods.

Goldman Sachs economists expect consumer spending as a source of strength in the economy and forecast real spending growth of 2.7% in 2023 and 1.9% in 2024 on a Q4/Q4 basis (average of four quarters).

Income

Real disposable income grew 3.9% year over year in October. Our economists expect that continued job growth, real wage growth and rising interest income will drive solid income growth next year. Real income overall is expected to grow around 4% in 2023 and 2.75% in 2024 on a Q4/Q4 basis.

Wealth

Household balance sheets remain strong. The net worth-to-disposable personal income ratio remains near its all-time high.

The personal savings rate ticked up to 3.8% in October, and our Research colleagues expect it to rise to 4% by end of 2023 and to 5% by end of 2024.

Debt

Consumers are less eager to borrow with consumer credit growth slowing significantly to 3.5% year over year, after extremely fast growth in 2022 and early 2023.

Household and debt servicing costs remain low by historical standards, while auto loan and credit card delinquency rates have normalized back to near their pre-pandemic levels.

The delinquencies are likely driven by some deterioration in finances among lower-income households, along with pressure from resuming student loan payments.

Consumer confidence

The University of Michigan’s Consumer Sentiment Index fell again in its November report, possibly due to concerns around the war in the Middle East.

However, the Conference Board Index of Consumer Confidence is more optimistic, increasing by 2.9 points to 102.0 in November. Consumers’ perceived likelihood of a US recession over the next 12 months fell to its lowest level (67%) since August 2022.

While economic data and sentiment remain mixed towards the end of 2023, our colleagues’ research shows the US consumer is still healthy and resilient.