NEW YORK—The Federal Reserve Bank of New York’s Center for Microeconomic Data released the December 2020 Survey of Consumer Expectations (SCE) Household Spending Survey, which provides information on individuals’ experiences and expectations regarding household spending. The survey shows a continuation of relatively modest monthly household spending growth compared to pre-pandemic levels. While the share of respondents who reported making a large purchase during the past four months has increased for most spending categories since April 2020, the share reporting spending on vacations dropped further to a new series’ low. Year-ahead total household spending growth expectations instead rose sharply, continuing its rebound from the steep decline in spending expectations measured in April. Similarly, median year-ahead expected growth in non-essential and essential household spending both rose to new series highs. Expected spending responses to an unexpected 10% increase in income shows an average 36.3% would be used to pay down debt, 44.5% would be saved or invested, and 19.3% would be spent or donated.
Experiences
- The median increase in monthly household spending compared to a year ago was 1.6%, retreating from 1.9% in August while remaining well below its December 2019 reading of 2.5%. The decline from its August reading was driven by respondents aged 40 to 60 and by lower income (below $50,000) respondents.
- Some 54.6% of households in December 2020 reported making at least one large purchase in the last four months, slightly above the 54.0% reading in August and the second consecutive increase since the series reached its low in April 2020 of 50.7%. Despite the gradual increase, the proportion remains well below its December 2019 level of 62.5%, and does so for all age, education, and income groups.
- The proportion of households who made a large purchase in the past four months of electronics and vehicles increased in December 2020, approaching December 2019 levels. The share reporting purchases of home appliances, retreated slightly from its series high of 14.5% in August 2020, while the proportion reporting spending on vacations dropped to 8.4%, a new series low.
- The reported degree of month-to-month variability in household income was relatively unchanged in December 2020 compared to its August reading, remaining elevated compared to December 2019. The proportion of households who reported their household incomes (before taxes) vary by less than 5% was 80.8% compared to 82.7% in a year ago. The share who reported that their incomes vary by more than 15% from month to month was 4.0% compared to 2.8% a year ago. The latter increase was greatest among younger (under 40) and lower income (below $50K) respondents.
Expectations
- Median expected growth in household spending over the next year increased sharply to 3.0% in December 2020 from 2.2% in August 2020 and 2.4% in December 2019. The increase was broad based across education and income groups.
- Relative to December 2019 readings, and to some extent reflecting lower spending levels since the start of the pandemic, median year-ahead expected spending growth in clothing, food, utilities, recreation and transportation rose in December 2020, while those for education, housing, and medical care declined.*
- Differentiating spending on essential and non-essential items, the median year-ahead expected change in household spending on essential items, such as daily living expenses, over the next year increased to 4.1% in December 2020 from 3.5% in August and 3.0% in December 2019. The median expected change in spending on non-essential items, such as hobbies, leisure, or vacation, over the next year also increased to 1.6%, from 1.0% in August and 1.4% in December 2019. Both December 2020 readings are new series highs.
- The average likelihood of making a large purchase in the next four months increased for furniture, home repairs, a house or apartment, vacations, and vehicles compared to August. Relative to December 2019 readings, the average likelihood of making a large furniture, home repair, or home purchase remained elevated, while that of vacations remained considerably depressed, recording at 13.0% in December 2020 compared to 25.5% in December 2019.
- Reported expected spending responses to an unexpected 10% increase in income shows an average 36.3% would be used by households to pay down debt (down from 36.5% in December 2019), 44.5% would be saved or invested (46.4% in prior year), and 19.3% would be spent or donated (17.1% in prior year).
Detailed results are available here.
About the SCE Household Spending Survey
The SCE Household Spending Survey, fielded as part of the SCE (Survey of Consumer Expectations), provides information on consumers' experiences and expectations regarding their spending patterns. Every four months, SCE panelists are asked details about their expectations for year-ahead changes in household spending (both in the aggregate and by category), spending on essential and non-essential items, and the likelihood of making different large purchases. The SCE Household Spending Survey also solicits information on the expected spending and saving response to an unexpected increase or decline in household income. In addition to questions about large purchases and changes in total spending over the past year, respondents are asked about the month-to-month variability in their household income.
More information about the SCE survey goals, design, and content can be found at: http://www.newyorkfed.org/microeconomics/sce.html
* Due to a data recording error in the “expectations about household spending by expense category” series, the data for this series has been revised going back to December 2014.
