NY Fed: US Consumer Optimism Surges For Long Term

A new study from the Federal Reserve Bank of New York shows that people expect the economy to rebound by next year, according to a press release.

The study, published Monday (Jan. 25), said year-ahead total household spending growth expectations rose sharply, with a continuing rebound from the severe downturn in April as the pandemic was beginning, the release stated.

In addition, median year-ahead expected growth in non-essential and essential household spending were both up to new series highs, according to the release.

If consumers had an unexpected 10 percent boost in income, 36.3 percent would be used to pay debt, 44.5 percent would be saved or invested, and 19.3 percent would be spent or donated, the release stated.

The study found that 54.6 percent of households reported in December that they had made at least one large purchase, according to the release. Despite the increase from earlier months in the pandemic, the number is still below the 62.5 percent seen in December 2019.

The median expected growth for all households sat at 3 percent in December, up from 2.2 percent in August and 2.4 percent in December 2019, according to the release.

Digging into the difference between the spending on essential or non-essential items, the median year-ahead expected change in household spending on items like daily living expenses increased to 4.1 percent in December, up from 3.5 percent in August. On non-essential items, such as hobbies, leisure or vacations, the median expected change in spending rose to 1.6 percent, which was a boost from 1 percent in August, the release stated.

As the recent pandemic aid relief bill passed in the U.S., restaurant chains reported that they had seen spikes in spending, PYMNTS reported. The bill included $600 stimulus checks for individuals and $300 per week in new unemployment benefits. Several chains, including Church’s Chicken, Checkers, Noodles & Company and TGI Fridays, said they saw higher spending that they believed was linked to the new funding.

According to the report, the bubble could burst if the pandemic takes an unexpected turn or rules continue to evolve from governments.