Americans have slowed down some of their spending and expect to pull back a little more, but paying down debt — and still having some fun — remain priorities.
The median increase in monthly household spending slowed to 5.01% in December 2023, from 5.5% in August 2023 and 7.1% in December 2022, according to Federal Reserve Bank of New York survey data released Tuesday.
That’s the lowest reading since April 2021 but is almost twice the rate seen pre-pandemic, New York Fed data shows.
The latest Survey of Consumer Expectations Household Spending Survey, which is released every four months, also showed that households expect to spend less in the year ahead.
The median expected growth in monthly spending dropped to 3% last month from 3.4% in August 2023 and 4% in December 2022. The most recent reading is the lowest since December 2020 and is trending closer to the pre-pandemic reading of 2.4%.
Survey respondents said they expected to spend less on everyday essential spending. That median change dropped to 4.5% in December 2023 from 4.8% in August 2023 but remained well above pre-pandemic levels.
Still, respondents planned to keep nonessential spending the same. That median growth rate remained at 1.9%, according to the report.
Consumer spending has remained strong despite high (but slowing) inflation and a sharp rise in interest rates. The spending has kept the economy churning, but it’s also potentially coming at a cost: Americans have relied heavily on debt to make their purchases.
According to Tuesday’s report, that credit usage remains top of mind: A growing share of respondents said they’d pay down debt if their pay unexpectedly increased by 10%.
As of December 2023, respondents said they’d allocate 38.4% of the unexpected income gain toward paying down debt. That’s up from 33.8% in December 2022 and the highest share since August 2016. Comparatively, the 16% that would reportedly be spent is the lowest recorded by the New York Fed, which started the series in August 2015.
The survey showed that people have pulled back some on making large purchases, especially for furniture. That’s expected to continue during the next four months, respondents indicated; however, the average likelihood of buying a home increased, according to the report.
