July 2024 Consumer Dashboard

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

Consumer spending is showing signs of getting back on track towards the end of June. This comes as the last quarter real GDP rose 2.8% by the year, above consensus expectations.

Let’s take a deeper look at Goldman Sachs Research’s analysis.

Personal Consumption Expenditures (PCE)

The latest economic data showed that the core PCE price index, which excludes the volatile food and energy categories, rose by 0.18% month over month in June and the year-over-year rate edged up to 2.63%, in line with expectations.

Market-based core PCE inflation increased 0.16% month over month. This measure includes PCE components that are deflated by either a detailed consumer price index (CPI) or a producer price index (PPI).

Spending

Consumer spending increased by 0.3% in June, in line with consensus expectations. Real personal spending increased by 0.2% in June, reflecting a 0.2% increase in both real goods and real services spending.

Goldman Sachs Research economists believe that spending weakness this spring was mostly driven by backward-looking tax payments and inflation pressures and that their forecast for above-consensus real spending growth of 2.2% in 2024 in Q4/Q4 terms remains on track.

Income

Personal income increased by 0.2% in June, below consensus expectations. Increases in nominal wage and salary income, transfer receipts, and income receipts from assets were offset by a decline in rental income and proprietors’ income. Nominal disposable personal income increased by 0.2%.

Goldman Sachs Research expects that continued job gains and strong real wage growth will lead to 2.5% real income growth in 2024 on a Q4/Q4 basis. They also anticipate positive income growth for all income quintiles with less divergence across income groups in 2024 than in recent years.

Wealth

Household balance sheets have strengthened due to asset price increases. The net worth-to-disposable personal income ratio remains near its all-time high, including among lower-income households.

While cash balances for lower-income households have mostly normalized, Goldman Sachs Research economists anticipate the recent rise in asset prices will provide a 0.3 percentage point boost to spending growth over the next year.

The personal savings rate edged down to 3.4% from a downwardly revised 3.5% in May. Our economists forecast that savings will recover to 4.0% by the end of 2024.

Debt

Consumer credit growth ticked up to 2.1% year over year but remains subdued, and household leverage and debt servicing costs remain low by historical standards.

Credit card delinquency rates continued to rise in the first quarter, likely due to a riskier borrower pool, rising interest expenses, and the restart of student loan payments. Some lower-income households may be exhausting their borrowing capacity.

That said, Goldman Sachs Research economists expect delinquency rates to rise only modestly going forward barring an unexpected labor market deterioration.

Consumer confidence

The University of Michigan’s Consumer Sentiment Index declined in its July report. The survey indicated high prices continue to weigh on attitudes, particularly for those with lower incomes. However, the labor market expectations are relatively stable, providing continued support to consumer spending.

The Conference Board Consumer Confidence Index increased by 2.5 points to 100.3 in July – roughly in line with consensus expectations – from a downwardly-revised June level. Consumers’ perceived likelihood of a US recession over the next 12 months remained at 66%.

Goldman Sachs Research believes the US consumer is still healthy and expects spending to continue to grow at a robust pace, supported by solid real income growth so far, however, our economists will continue monitoring the labor market for the latest developments.