According to McKinsey’s most recent ConsumerWise survey, in the third quarter of 2024, US consumer optimism reached its highest point in a year, increasing to 41% from 33% in the previous quarter. However, this boost in sentiment is tempered by continued caution, particularly around economic volatility and rising prices. High-income consumers remain more optimistic than middle- and low-income groups, but age plays a key role in shaping sentiment. Younger generations, including Gen Z and millennials, are generally more positive about the economy than Gen Xers and baby boomers, possibly due to long-term unemployment affecting older workers more.
A gender gap also persists, with male respondents reporting higher optimism levels (47%) than female respondents (37%). Men are more likely to feel positive about job market improvements, while women express concerns about making ends meet. Inflation remains a significant issue for over half of the consumers surveyed, despite a recent stabilization in prices. Many retailers are lowering costs, contributing to a slight increase in optimism, with 37% of respondents feeling better about the economy due to price stabilization.
Spending intentions reflect a mixed picture. Consumers plan to increase spending on essential, semi-discretionary, and discretionary items, but some categories, like fresh produce and gardening supplies, may see decreases as seasonal spending patterns shift. Price sensitivity remains high, particularly among younger consumers, 86% of whom report trading down for better deals. Additionally, more consumers are using buy now, pay later (BNPL) services, especially for back-to-school shopping and e-commerce sales.
Despite the optimism, many consumers intend to splurge, with 42% expressing plans to treat themselves, particularly on dining and travel. However, the overall willingness to splurge varies by income and demographic group, with low-income Gen Xers and middle-income baby boomers showing reduced intent to splurge compared to other groups. External factors like market uncertainty and upcoming geopolitical events may still impact consumer confidence moving forward.
Read the full McKinsey report here.
