Household spending rose modestly over the last four months, but consumers’ expectations for how much more they’ll be able to spend a year from now surged, according to a survey released Monday by the New York Federal Reserve.
The report showed that consumers are slowly spending more as the economy reopens and more people gradually return to work, and offered a sign consumers are hopeful their financial situations will improve further as the coronavirus is contained.
The share of households that made at least one large purchase in the last four months rose to 54.6% in December. That is up from a series low of 50.7% in April of 2020, but was still well below pre-pandemic level of 62.5% in December of 2019.
Consumers from all education and income groups were much more optimistic about how much they would be able to spend in a year, with the median household expecting spending to grow by 3% over the next year, up from 2.2% in August.
Households reported in December that they expect spending on daily living expenses and other necessary bills to rise by a median of 4.1% over the next year, up from 3.5% in August and reaching a series high for the survey.
Consumers also said they expected spending on nonessential items such as hobbies, entertainment and travel, to rise by a median 1.6% over the next year, up from 1.0% in August and also reaching a high for the survey.
If surprised with a 10% increase in income, consumers said they would allocated an average 36.3% to paying down debt, 44.5% would be saved or invested and 19.3% would be spent or donated.
The household spending survey is conducted every four months as part of the New York Fed’s Survey of Consumer Expectations.