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We have spoken much over the last six months or so about the resilience of the US consumer. One of the main reasons for the out-performance of the US economy was the unexpected strength in US consumption. This was put down to a robust labour market and the drawdown of excess savings. The latter would not go on forever and consumption growth would eventually slow. However, if we look at the chart below the outlook is brighter.
This chart shows the progress of net wealth of US households and nonprofit organisations – households are by far the biggest segment here. You can see in 2020 and 2021 the big jump in net wealth as the economy went into lockdown and households received large transfers from the government. Once the economy re-opened and people began to spend again net wealth dropped.
However, in 2023 as spending growth increased so did net wealth, largely as a result of a significant rise in the value of financial assets. Net wealth is now higher than it was pre the pandemic. Any dis-saving that may have happened has not dented the wealth of US consumers, leaving them in a very healthy financial state.
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