Tax Day: Income and Expenditure in the USA
US consumers have one of the highest levels of per capita gross income and consumer expenditure among developed economies, and their discretionary spending power continues to rise gradually. However, the income gap remains high, resulting in market polarisation and restraining middle-class expansion. A monetary tightening policy will lead to slower growth in income and expenditure in the USA in the coming years, while a possible trade war would also pose a risk to the consumer market.
Social Class E Is Expected To Grow the Fastest
Lower social classes continue to be predominant in the USA, as a result of the country’s uneven income distribution:
- Social class E — the lowest income social class — recorded the strongest rate of expansion across social classes over 2012-2017 and is expected to remain as the USA’s fastest growing through to 2030. This will fuel demand for basic, budget goods and services.
- As a result of population ageing, elderly consumers aged 65+ are expected to see significant rises in their shares in all social classes in the USA by 2030, creating a larger market for health goods and medical services, travel, and leisure and recreation.
Middle-class Expansion Hindered by High Levels of Income Inequality
- The USA’s income inequality is high by global standards and one of the highest among developed economies.
- The rural/urban divide remains significant in the USA, given the concentration of high-paid jobs in large cities. In addition, high-income households benefited more from the government’s economic stimulus during the 2009-2016 period, which has resulted in a surge in equity prices.
- Over the period of 2018-2030, income inequality in the USA is forecast to remain high, generating opportunities for businesses to serve consumers at both ends of the income distribution. As the richest households are expected to see the fastest real increase in their disposable income through to 2030, there will be a growing demand for luxury goods and services.
US Consumer Market Expected To Record Slower Expansion
- The share of essential spending (expenditure on food, non-alcoholic beverages, clothing and footwear, and housing) of American households has declined slightly, on the back of rising disposable income.
- Between 2018 and 2030, the discretionary spending power of American households will continue to rise slowly, creating more opportunities for marketers of discretionary goods and services, such as communications, healthcare and education.
- Consumer expenditure is expected to see slower but stable growth in the coming years, given an expected slowdown of the US economy, as the US Federal Reserve will continue to tighten its monetary policy.
- Communications is forecast to be the fastest-growing spending category through to 2030, followed by health goods and medical services, driven by demand from the country’s Millennials and elderly consumers.