American Consumer Spending Passes $10 Trillion, Future Looks Rosy

According to Mintel’s American Lifestyles 2014, renewed consumer spending is in line with pre-recession trends, and consumer optimism is higher than it’s been in years. The study found that personal consumption expenditures on consumer goods reached $10 trillion for the first time in 2013, and the outlook for 2014 is for spending to increase further by 3.6%, more than three times the projected rate of inflation for the year.

Fiona O’Donnell, category manager, multicultural, lifestyles and leisure at Mintel, says “…in 2014, Americans… have cautiously accepted that things are better… confidence in personal finances … (allows) consumers to think about the future… “

The report shows forecasts that total US consumer expenditures will grow by 20% from 2013-2018 to reach $12,025 billion. In comparison, expenditures increased just 15% from 2008 to 2013. The categories that show the greatest gains over the next five years are leisure and entertainment, vacations and tourism, technology and communications, and alcohol on premises.

Fast Growing Consumer Spending Categories (% Growth From 2013-2018; $ in Billions/2013)

Growth Category

Avg. Spend 2013, B$

% Projected Growth to 2018

Leisure & Entertainment

335.8B

28.5%

Vacations & Tourism

221.8B

27.3

Technology & Communications

661.6B

25.2

Alcohol on premises (OOH)

92.7B

23.7

Avg. growth in personal consumption

10T

20%

Source: Mintel, May 2014

Over the course of one year, the share who say they spend extra money on vacations nearly doubled, the greatest gain for any one area of consumer spending, and is a sign of optimism since when money is tight vacations are the first discretionary areas to be cut from the budget.

O’Donnell notes that “… Adults aged 18-24… see all the possibilities ahead… in part due to social media and the ability to share instantaneously… young adults are placing a higher value on ‘experiences’ vs. more traditional purchases of their parents’ generation… Baby Boomers reaching retirement… have more free time… (for) expenditures on… dining out, vacations, leisure & entertainment.and alcohol spending… “

Americans are also focused on self-improvement for 2014, says the report. Top goals for 2014 include:

  • Increased family time (88%)
  • Healthier diet (88%), exercising more (87%)
  • Getting household finances in order (84%)
  • Achieving a better work/life balance (82%)
  • Taking care of personal appearance (81%).

O’Donnell concludes that “… improved personal financial situation has allowed… looking more widely at what goals they would like to accomplish… with less mental energy expended on financial worries… in a better position to make these aspirations a reality…”

Breaking down winning categories paints a full picture of optimism and growth:

Vacations and tourism spending

  • has outpaced total US consumer expenditure growth and over the next five years, steady growth is expected in this segment, with total expenditures forecast to reach $282.4 billion by 2018, a 27.3% increase over 2013 spending
  • Interestingly, while previously, 41% of respondents indicated they were spending less on vacations than they had in the year before, this share has now declined dramatically to just 30%, says the report. Baby Boomers are a driving force behind vacation spending, though families headed by young Millennials will also contribute to the market

Leisure and entertainment

  • shows expenditures forecast to increase by 28.5% to reach $431.6 billion in 2018, nearly $150 billion more than the total forecast for vacations and tourism
  • More than half of respondents surveyed say they spent more or about the same amount on leisure and entertainment in 2013 compared with prior years. Young adults, particularly men aged 18-34, are most likely to say they are spending more on this category, says the report. In 2013, nearly half of the spending in this sector is attributed to membership dues for clubs, and fees associated with sports centers, parks, theaters, and museums
  • Millennials have increased their spending on leisure compared to prior years, and plan to spend more in the coming two years. They spend half of their entertainment budget on audio-visual and video gaming equipment and 57% of Millennials prefer to spend downtime in front of an electronic device
  • As the relatively wealthy Baby Boomer generation moves on to retirement, this group will have more time to devote to leisure and entertainment and, at 76-million strong, their shift from the work place to leisure space will positively impact the category

Spending on out-of-home alcohol

  • is estimated to have increased by 5.4% from 2012-13 (the strongest year-over-year growth of any other sector evaluated) to have reached an estimated $92.7 billion in 2013. Steady growth is predicted, with the market forecast to reach $114.7 billion in 2018, an increase of 23.7% over the next five years.
  • Over the past year, nearly one in 10 said they increased spending on alcoholic drinks (out of home). Additionally, compared with 2013, more consumers have moved from saying they are “spending less” (26%) compared to years prior to “spending about the same” (34%). While the increase is only marginal, these numbers indicate that consumers aren’t trading down or drinking at home as much.

Many of the staple consumer electronics products and services

  • have struggled to maintain their historically high growth levels, largely due to market saturation for electronic items such as televisions and the consolidation of functionality to multipurpose devices such as smartphones. Aside from smartphones and tablets, the rate of increase in consumer spend on hardware and electronic equipment has slowed considerably, also being impacted by consolidated functionality within mobile technology
  • With more content going digital, consumer interest in streaming, video-on-demand and other internet media will rise rapidly, with projected sales of streaming TV and movies doubling between 2013 and 2018. Nearly half of consumers reported they watched some form of streaming video (purchase, rental or free) in 2013
  • While the cable, satellite, television and radio segment saw an uptick in sales in 2013, this may be driven largely by bundled services that include the Internet. There is not much room for growth in the pay TV market, says the report, and sales are forecast to slowly decline through 2018. In addition to traditional bundling options, service providers may be able to add value by offering unique bundles that include home security and automation features or cellular service at a discount

Bryant Harland, technology analyst at Mintel, concludes by noting that “… many segments of technology and communications are at a turning point given the prevalence of hardware in consumers’ lives. While device manufacturers have historically focused on bigger and better devices, consumers and the supporting infrastructure will need time to catch up. A major emphasis for 2014 will be on the quality of the software and services that those devices provide access to, rather than the hardware itself… ”

For more information from Mintel, please visit here.

 

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1 comment about "American Consumer Spending Passes $10 Trillion, Future Looks Rosy ".
  1. Jull Sanders from MO Team , June 7, 2014 at 3:16 p.m.
    With the reported economic growth and more or less stabilized situation people really gain more confidence in their future. But to my mind most of the individuals are concerned not on the entertainment, but on the getting rid of the financial obligations they have in various forms: personal consumer loans, student loans, car loans, mortgages.