U.S. consumer situation update in July: spending falls for three consecutive months

McKinsey ConsumerWise recently released an update on the US consumer situation in July. The study shows that although US consumer optimism has continued to rise in recent months, spending by all age and income groups is still lower than a year ago. Real spending has fallen for the third consecutive month, and nominal spending has also fallen for the first time.

Consumer confidence rises, overall spending continues to fall

U.S. consumers showed a small increase in optimism during the spring months, but overall real spending across all age and income groups has fallen for the third straight month on a year-over-year basis.

In May 2023, consumer spending (measured by credit card spending) actually fell by more than 6% compared with a year ago, and nominal spending growth turned negative for the first time.

Of the sectors tracked, only travel saw a slight increase in spending, with real spending up 1% year-over-year. This was mainly due to the ships and cruises segment, which saw real spending growth of 40% year-over-year and also experienced outperformance in the previous month.

The decline in spending was more pronounced among low-income and young people

According to statistics, real spending of all income and age groups has declined year-on-year. By income level, low-income consumers still saw the largest decline, down 9%, and by age, real spending of Generation X, Generation Z and Millennials fell 7.1% year-on-year.

Among them, the actual spending of low-income Generation Z and millennials fell more sharply, down 9.5% year-on-year. Although the spending of baby boomers and high-income consumers also fell, the decline was smaller, at 6% and 5% respectively.

Research shows that there is still a mismatch between consumers’ shopping intentions and actual shopping actions, which is particularly evident among millennials.

McKinsey's survey of consumer behavior in the second quarter showed that consumers intended to shop in multiple categories. However, data from May showed that actual spending still showed a decline, with only travel spending increasing. Millennials were the group with the strongest shopping intentions in the survey last quarter, but in May, their actual year-on-year spending fell by more than 5%.

Editor✎ Ashley/

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