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As we exit the crucial holiday spending season, our CHIs show that upper-income consumers’ spending intent deteriorated sharply, with a 10.8-point fall in January.
This drop in upper-income spending intentions comes on the heels of a smaller 3.2-point fall in December. Alongside a sharp, parallel back-to-back drop in this group’s composite outlook score—of 2.6 points and 3 points in December and January, respectively—this decline looks significant. This is especially true since the same trend is not mirrored by other income groups.
The outlook score for upper-income earners is driven by expectations for investment portfolios, which is this group’s primary asset. While the S&P 500 climbed 28% in the first 11 months of last year, it fell 3.5% in December—the likely trigger for the fall in spending intentions among upper-income Americans.
Next month, we may see this month’s decline in spending intent ease, matching the pattern of last January, when a large fall was followed by a moderate recovery in February. But in 2024, spending intentions never recovered to earlier average levels. The average 2024 reading of 106.6 was 7 points lower than the 2023 average of 113.8.
As the drop in spending intent in early 2024 ultimately resulted in a sustained shift down to a lower average level for the full year, this month’s fall suggests another such downshift may be emerging. With upper-income earners representing more than 50% of US discretionary spending, this emerging trend may be an early indicator of broader weakness at the start of 2025. And this weakness may have a wider impact, outside the US, given that the American consumer provides an outsized portion of global demand.
Another year of rising stock prices or policy shifts could alter the outlook. But the overall picture suggests businesses should consider risk scenarios in which US upper-income consumers take a step back, particularly on discretionary spending, if a renewed and continuing rally in equity markets fails to materialize.
Bain and Dynata created the Consumer Health Indexes in 2017 to support business decision makers in their near- and midterm planning for their businesses. To achieve this, we have been asking questions that are within the expertise of the people taking our surveys. What are their personal spending plans? What are their saving plans? What is their use-of-debt plan? These are direct, easily understandable questions about survey respondents’ near-term expected behaviors. They require little interpretation, macroeconomic expertise, or filtering through the lens of the political or news cycle. Since 2017, our clients have been using our Consumer Health Indexes as a differentiated data point relative to existing confidence indicators.
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