September 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 was somewhat lower than expected in August, but the personal savings rate was not as low as previously reported, reflecting an annual update to the official national economic data.

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

Personal Consumption Expenditures (PCE)

The core PCE price index, which excludes the volatile food and energy categories, rose by 0.13% month over month in August, and the year-over-year rate edged up to 2.68%, somewhat below expectations.

Headline prices, which includes all items, increased 0.09% in August and the year-over-year rate fell to 2.24%.

Market-based core PCE inflation increased 0.15% 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 0.2% in August, also below expectations. Real personal spending increased 0.1% in August, reflecting a 0.2% increase in real services spending but flat real goods spending.

Goldman Sachs Research economists believe anecdotal reports overstate consumer weakness, forecasting that real spending will grow by 2.6% in 2024 in Q4/Q4 terms.

Income

Personal income increased by 0.2% in August, below consensus expectations, as increases in employee compensation, rental income, and transfer income (payment made without exchange for goods or services, such as government benefits) were offset by declines in proprietors’ income and asset income.

Goldman Sachs Research forecasts that continued job gains and strong real wage growth would lead to 2.4% real income growth in 2024 on a Q4/Q4 basis, with positive income growth across all income quintiles.

Wealth

Household balance sheets remained resilient as the net-worth-to-disposable personal income ratio remained near its all-time high.

The personal savings rate edged down to 4.8% from an upwardly revised 4.9% in July, reflecting the recent annual update to the National Economic Accounts. This includes adjustments to source data, methodologies, and revisions to the GDP.

Debt

Consumer credit growth remained subdued in July at 1.9% year over year. Household leverage and debt servicing costs stayed low by historical standards.

Credit card delinquencies increased at a slower pace in the second quarter, while subprime auto loan delinquencies ticked down from their peak earlier this summer.

Revolving home equity loans have increased in recent weeks, suggesting lower rates may be incentivizing some households to utilize the historically large amount of home equity to support spending.

Consumer confidence

The University of Michigan’s Consumer Sentiment Index ticked up to 70.1 in its September report, rising more than 3% above August. The report noted that although frustration over high prices has contributed to sentiment remaining below its historical average, consumers appeared fully aware that inflation is slowing.

The Conference Board Consumer Confidence Index, on the other hand, decreased by 6.9 points to 98.7 in September – below expectations – from an upwardly-revised August level. Consumers’ perceived likelihood of a US recession over the next 12 months ticked up by 0.5 percentage point to 66.5%.

Considering that several economic reports including the Advance Economic Indicators have been stronger than expected, Goldman Sachs Research boosted its third quarter GDP estimate to 3.2% on a quarter-over-quarter annualized basis.

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