Consumer Spending Plans Lower in April on Inflation Concerns: Cowen

Consumer spending intentions ticked down slightly in April, Cowen reported Thursday, saying an April survey of 2,500 U.S consumers showed “inflationary pressure worsened,” with 70% of respondents indicating prices for daily goods were up year on year vs. 60% in a March survey. About 27% said prices were up “significantly,” vs. 19% in March, the report said. In response to higher prices, 42% of respondents were cutting or expected to cut spending, “up sharply” from 34% in March, Cowen said.

Top areas for expected spending reductions were in social events and dining out (55%), travel (49%), groceries (47%), apparel (46%) and personal care products (37%), Cowen said. Media and at-home services, electronics and annual memberships had a 2% uptick in spend shaving from March, with 27% cutting back on electronics purchases, 29% trimming entertainment services and 24% dialing back on cable, internet or phone service, it said.

Some 28% of respondents said they had spent more online in April vs. 12 months ago, 18% spent less and 54% had flat e-commerce spending year on year, it said. On the effect from rising gasoline prices, 67.4% of respondents reported a significant or moderate impact, up slightly from 66.7% in March.

Personal savings sank for 51% of respondents in April vs. 46% in March, Cowen said, though the savings picture varies according to household income. Personal savings hit an all-time high at 16.9% in 2020, falling to 11.9% last year but still near record levels, largely due to government stimulus, the strong labor market and limited mobility, it said.

In households with under $50,000 income, 37% of respondents had more savings in April vs. 2021; 40% had the same amount and 23% were living paycheck to paycheck, Cowen said. In the $50,000-$100,000 bracket, half of consumers had more savings, 44% had lower savings and 6% were living paycheck to paycheck, it said. Of $100,000 and over households, 71% had more savings year on year, 27% had less savings and 2% were living paycheck to paycheck, it said.

The expected COVID-19 disruption factor declined in April, with 46% of respondents saying the pandemic would disrupt their lives for another six months or more, down from 69% in December when delta and omicron variant concerns drove sentiment lower. April data indicated a “stability” in U.S. sentiment toward the current COVID environment, it said. Sentiment toward staying in hotels rose in April, but comfort with traveling via airplane was stable from March and down from December, it said.

Quantifying the impact of inflation on consumer spending is difficult using a direct survey, said Cowen, but respondents in the monthly tracker increasingly indicate they will reduce spending because of higher prices. It noted supply chain disruption continues to be an issue for many global manufacturers.