May 2024 Consumer Dashboard

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

Consumer spending is showing early signs of slowing in the second quarter of the year. 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 0.25% month over month in April and the year-over-year rate declined to 2.75%, in line with expectations. Monthly core PCE inflation was revised higher for March to 0.33%.

Headline prices, which include all categories, increased 0.26% on the month and 2.65% from a year earlier.

Spending

Consumer spending increased by 0.2% in April, one-tenth below consensus expectations. Real personal spending decreased by 0.1% in April, reflecting a 0.4% decrease in real goods spending and a 0.1% increase in real services spending.

Recent data have been weak, however, as nominal retail sales were unchanged in April (and were revised down in prior months); core retail sales (excluding autos, gasoline, and building materials) decreased by 0.3% in both nominal terms and real terms. Company commentary in the first quarter earnings signal a more cautious consumer.

Goldman Sachs Research economists see the recent headwinds to consumer spending as mostly driven by backward-looking tax payments and inflation pressures. However, they continue to forecast above-consensus real spending growth of 2.6% in 2024 in Q4/Q4 terms.

Income

Personal income increased by 0.3% in April, in line with consensus expectations, reflecting a 0.2% increase in nominal wage and salary income

Nominal disposable income (not adjusted for inflation) increased by 0.2% despite a 0.8% increase in personal taxes.

Wealth

Household balance sheets have strengthened due to asset price increases, especially for older households, which could provide a positive impulse to spending growth in 2024. The net worth-to-disposable personal income ratio remains near its all-time high.

The personal savings rate remained unchanged from an upwardly revised 3.6% in March (it was previously published at 3.2%). Goldman Sachs Research economists forecast that savings should rise to 3.9% by the end of 2024.

Debt

Consumer credit growth has slowed to 2.3% year over year, 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 only rise modestly going forward barring an unexpected labor market deterioration.

Consumer confidence

The Conference Board Consumer Confidence Index increased 4.5 points to 102.0 in May – above consensus expectations – from an upwardly-revised April level, the first increase since January. Consumers’ perceived likelihood of a US recession over the next 12 months increased to 69%, the highest level since November 2023.

The University of Michigan’s Consumer Sentiment Index declined by 8.1 points to 69.1 in its May reading. The survey noted that consumers “expressed concerns over labor markets; they expect unemployment rates to rise and income growth to slow,” But that “sentiment still remains almost 20% above a year ago and about 40% above the all-time historic low in June 2022.”

The consumption details in the latest economic report indicate weak spending momentum to start the quarter. Goldman Sachs Research economists’ second quarter GDP estimate stands at 2.7%.

This article is for informational purposes only and is not a substitute for individualized professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs Bank USA, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions.