Study: Consumer optimism, spending, travel plans up despite recession concerns
Consumers are feeling more optimistic these days and it’s reflected in their spending and vacation plans.
That’s one of the findings of global professional services firm Alvarez & Marsal’s Consumer and Retail Group’s spring consumer report, which looks at the impacts of inflation and resultant changes in consumer spending over the last year, as well as spending expectations for the coming six-month period. The firm noted that, compared to fall 2022, there is a significant overall increase in financial optimism and plans to spend.
Among the key takeaways of the Consumer Sentiment Survey Spring 2023 report: Consumer expectations regarding things getting better, saving more, having more money, and plans to spend the same or more on basic needs were all up from fall 2022.
In the six-month outlook, 61% of consumers expect things to get better for their family, up 13% from fall; 54% plan to save more, up 11%; 55% expect to have more money, up 10% and 88% plan to spend the same or more money, up 1%.
“Retailers should capitalize on this optimistic mindset by balancing consumer preferences, managing inventory, and driving traffic in-stores & online,” said Jonathan Sharp, managing director at Alvarez & Marsal’s Consumer and Retail Group, and lead author of the study. “But smart retailers will remain agile should consumer mindsets revert.”
The found that consumers have shifted their spending from focusing on only basic needs to non-essentials. By category, all non-essential categories were up this season compared to fall 2022. Additional findings are below.
• Vacation spend is up year over year – half of respondents are taking a vacation this spring/summer, and 31% of those taking a vacation plan to travel internationally (up 12% year-over-year).
• Consumers’ top channel preference is in-store. But there is a slight decrease in in-store shopping for a majority of spend categories compared to last fall.
• The top five categories purchased in-store are fresh food, dry packaged grocery/beverages, personal care, prepared food and footwear.
• Sixty-five percent of consumers believe that prices will continue to rise, and two thirds believe the U.S. is in — or will be in — a recession within the next year.
• Regular use of retail apps is surging. Amazon continues to dominate the app space, but Walmart has made big strides and is now trailing by only 7%. Target, the third most popular retail app, has strongly recovered from its slumping usage last fall with a solid increase of 10%. Dollar Genearl and Walgreens round out top five.
Social commerce saw the largest uptick in retail traffic, jumping up 19% from fall after a drastic 17% decrease from last spring.
• Three in four shoppers are willing to pay at least slightly more for an environmentally friendly product, a 10% increase from fall
“Our objective was to understand how the financial headlines American consumers have been hearing is affecting them in terms of their optimism or lack thereof, their buying patterns and expectations, and their preferred shopping channels,” noted Sharp. “What we found is that the ‘recession is coming’ drumbeat has got through to US consumers and they expect a slowdown in the coming months. That’s all theoretical for now and the reality is that the U.S. consumer is still punching – spending plans are up, inflation-fatigue is being overcome and optimism is back in fashion.”
This is the fourth installment of Alvarez & Marsal’s bi-annual Consumer Sentiment Report, based on a survey of 1,500-plus consumers matching the U.S. adult population according to gender, age, ethnicity, region and income. The report covers various changing behaviors in response to personal finances and the state of the economy, including consumers’ shopping priorities by category, concerns over rising prices, vacation plans, and other factors that will affect purchase decisions this spring/summer, and more.