Changewave Research: Consumer Spending s1

ChangeWave Research: Consumer Spending

June Consumer Spending Report

U.S. Consumer Spending Continues to Tick Higher but Confidence Drops

Jean Crumrine

Overview: After four consecutive moves upward, the latest ChangeWave survey shows yet another uptick in U.S. consumer spending for June. ChangeWave Research is a service of 451 Research.

The June 3-19 survey of 2,159 consumers contains the best overall spending scores of the past fourteen months. While there are no major increases this month within individual spending categories – and most retailers are little changed as well – Walmart is seeing a slight improvement and Apple is up slightly in the home entertainment market.

One note of caution, consumer confidence is down this month and expectations are experiencing a slight decline. But the positives in this survey clearly outweigh the negatives. Moreover, the U.S. economy is heading into the summer on an upbeat note for the first time in four years.

Overall Consumer Spending in June

A third of U.S. respondents (33%) say they'll spend more over the next 90 days than they did a year ago – up 1-pt from our previous survey in May. And just 25% say they'll spend less – which is also a 1-pt improvement from a month ago.

Putting the Findings in Context. As the following chart shows, this is the fifth consecutive monthly improvement – and while the latest move is only 2-pts better than last month, the June results represent the best overall spending scores of the past fourteen months.

Moreover, the 5-pt improvement in the past two months is in sharp contrast to the 8-pt decline during the same two month period a year ago – an encouraging overall sign for the consumer economy.

Individual Spending Categories

The individual categories are mostly holding steady this month, although a couple are edging downwards.

After improving in our May survey, spending on Consumer Electronics and Travel/ Vacation remain unchanged, while Durable Goods has ticked down 2-pt this month.

For the first time in five months Household Repairs/Improvements has registered a downtick – with 32% of respondents now saying they'll spend more compared to just 13% less – a net 2-pt decline since May.Restaurant Spending is down 1-pt, while Autos are holding steady this month.

Retailer Trends

For the second month in a row the spending picture for most major retailers is little changed.

The one exception here is Walmart – which has registered a 1-pt uptick for the second consecutive survey.

Costco is once again the leader in terms of overall spending growth – unchanged from May.

We note Target (down 2-pts) has declined for the second month in a row.

Home Entertainment Shopping

Amazon is down 4-pts from its all-time high last month, but is still the overall leader on the home entertainment retail front. Importantly, the 47% saying they’ll shop at Amazon for home entertainment and computer networking products is 3-pts higher than a year ago.

Apple (20%) is up 1-pt this month. Although Best Buy (28%) is also seeing a 1-pt uptick for the first time in four months, it’s still near the historically low level of a year ago.

A Drop in Consumer Expectations and Confidence

In a note of caution, even as overall spending continues to improve, consumer expectations are experiencing a slight pullback and confidence in the stock market has turned negative this month.

Consumer Expectations. One-in-four consumers (24%) now believe the overall direction of the U.S. economy will worsen over the next 90 days, which is 1-pt more than previously. But while 24% still think it will improve, that’s 2-pts worse.

Stock Market Confidence. A total of 42% now say they’re Less Confident in the U.S. stock market than they were 90 days ago – 8-pts worse than May. Only 16% say they’re More Confident – also 8-pts worse, and the lowest level of the past six months.

Respondents were asked about their investing plans going forward, and the rate of money inflow into U.S. Stocks (+3; down 3-pts) has slowed since last month. Non-U.S. Stocks (-4; down 6-pts) are once again registering a net money outflow.

On a positive note, the percentage saying they're spending less because of Reduced Income (34%) has declined 5-pts this month to its lowest level of the past two years.

And when asked how much they worry about someone in their family losing their job, only 23% of respondents say they worry A Great Deal (6%) or Quite a Bit (17%), while 31% say they Do Not Worry at All – a net 5-pts better than previously.

Bottom Line: After four consecutive moves upward, the latest ChangeWave survey shows yet another uptick in U.S. consumer spending for the month of June – the best overall spending scores of the past fourteen months.

These results are generally in line with the Federal Reserve’s recent announcement that they may begin pulling back on the bond purchasing stimulus program toward the end of the year if the economy continues to show improvement. In support of its policy statement, the Fed pointed out downside risks have diminished since the fall and the economy is growing moderately.

There are no major increases this month within individual spending categories – and most retailers are little changed as well – but Walmart is seeing a slight improvement and Apple is up slightly in the home entertainment market.

One note of caution, consumer confidence and expectations are experiencing a decline this month. But the positives in this survey clearly outweigh the negatives. Moreover, the U.S. economy is heading into the summer on an upbeat note for the first time in four years.

Summary of Key Findings

The ChangeWave Research Network is a group of 25,000 highly qualified business, technology, and medical professionals in leading companies of select industries—credentialed professionals who spend their everyday lives working on the frontline of technological change. ChangeWave surveys its Alliance members on a range of business and investment research and intelligence topics, collects feedback from them electronically, and converts the information into proprietary quantitative and qualitative reports.

Table of Contents

Summary of Key Findings 6

The Findings 8

(A) Overall U.S. Consumer Spending 8

(B) Individual Consumer Spending Categories 10

(D) Home Entertainment Shopping 13

(E) Consumer Expectations and Confidence 15

(F) Inflation and Energy Costs 18

(G) Impact of the Economy on Investors 21

ChangeWave Research Methodology 22

About ChangeWave Research 22

About 451 Research 22

The Findings

Introduction: After four consecutive moves upward, the latest ChangeWave survey shows yet another uptick in U.S. consumer spending for June. ChangeWave Research is a service of 451 Research.

(A) Overall U.S. Consumer Spending

Would you say your overall spending over the next 90 days will be more than last year, less than last year, or the same as last year?

Current
Survey
Jun ‘13 / Previous
Survey
May ‘13 / Previous Survey Apr ‘13 / Previous Survey
Mar ‘13 / Previous Survey Feb ‘13 / Previous
Survey
Jun ‘12 / Previous
Survey
May ‘12
More Spending Than Last Year / 33% / 32% / 31% / 30% / 29% / 31% / 32%
Less Spending Than Last Year / 25% / 26% / 28% / 29% / 29% / 31% / 26%
Spending Will Remain the Same as Last Year / 41% / 40% / 40% / 40% / 40% / 37% / 40%
Don't Know / 2% / 2% / 2% / 2% / 2% / 1% / 2%

Putting the Findings in Context. As the following chart shows, this is the fifth consecutive monthly improvement – and while the latest move is only 2-pts better than last month, the June results represent the best overall spending scores of the past fourteen months.

Moreover, the 5-pt improvement registered since April is in sharp contrast to the 8-pt decline during the same two month period a year ago – an encouraging sign for the consumer economy.

Note that the spending outlook has improved among middle and upper income households (Greater than $100,000).

(B) Individual Consumer Spending Categories

Which of the following consumer items will you be spending more money on over the next 90 days compared to last year? (Check All That Apply)

Current
Survey
Jun ‘13 / Previous
Survey
May ‘13 / Previous
Survey
Apr ‘13 / Previous
Survey
Mar ‘13 / Previous
Survey
Feb ‘13 / Previous Survey Jun ‘12 / Previous Survey May ‘12
Household Repairs/ Improvements / 32% / 34% / 34% / 32% / 30% / 31% / 35%
Travel/Vacation / 32% / 30% / 27% / 27% / 25% / 30% / 29%
Consumer Electronics / 12% / 12% / 11% / 12% / 15% / 13% / 14%
Restaurants/Everyday Entertainment / 12% / 13% / 12% / 11% / 11% / 12% / 13%
Healthcare Services / 12% / 13% / 13% / 15% / 16% / 11% / 12%
Durable Goods for the Home / 11% / 12% / 11% / 11% / 12% / 10% / 13%
Children's Services (e.g. camp, education, lessons, other activities) / 8% / 9% / 6% / 7% / 6% / 9% / 8%
Automobile Purchase / 6% / 7% / 7% / 6% / 7% / 7% / 7%
Other Services (e.g. adult education, fitness activities) / 4% / 4% / 3% / 4% / 4% / 4% / 4%

And which of the following consumer items will you be spending less money on over the next 90 days than last year? (Check All That Apply)

Current
Survey
Jun ‘13 / Previous Survey
May ‘13 / Previous Survey Apr ‘13 / Previous Survey Mar ‘13 / Previous Survey Feb ‘13 / Previous Survey Jun ‘12 / Previous Survey May ‘12
Consumer Electronics / 27% / 27% / 28% / 30% / 30% / 31% / 30%
Travel/Vacation / 23% / 21% / 24% / 24% / 25% / 26% / 23%
Restaurants/Everyday Entertainment / 23% / 23% / 24% / 27% / 26% / 26% / 25%
Durable Goods for the Home / 21% / 20% / 21% / 22% / 22% / 22% / 20%
Automobile Purchase / 18% / 19% / 17% / 19% / 19% / 20% / 21%
Household Repairs/Improvements / 13% / 13% / 13% / 14% / 14% / 15% / 13%
Healthcare Services / 7% / 6% / 7% / 7% / 6% / 7% / 8%
Children's Services (e.g. camp, education, lessons, other activities) / 7% / 7% / 7% / 7% / 7% / 8% / 9%
Other Services (e.g. adult education, fitness activities) / 7% / 8% / 7% / 7% / 7% / 8% / 9%

Change in Net Difference Score - Current Survey (Jun 2013) vs. Previous Survey (May 2013)

Current
Survey
Net Difference Score
(Jun ’13) / Previous
Survey
Net Difference Score
(May ’13) / Change in Net Difference Score
Other Services (e.g. adult education, health and fitness activities) / -3 / -4 / +1
Travel/Vacation / +9 / +9 / 0
Consumer Electronics / -15 / -15 / 0
Automobile Purchase / -12 / -12 / 0
Children’s Services (e.g. camp, education, lessons, other activities) / +1 / +2 / -1
Restaurants/Everyday Entertainment / -11 / -10 / -1
Household Repairs/Improvements / +19 / +21 / -2
Healthcare Services / +5 / +7 / -2
Durable Goods for the Home / -10 / -8 / -2

The individual categories are mostly holding steady this month, although a couple are edging downwards.

After improving in our May survey, spending on Consumer Electronics and Travel/ Vacation remain unchanged, while Durable Goods has ticked down 2-pt this month.

For the first time in five months Household Repairs/Improvements has registered a downtick – with 32% of respondents now saying they'll spend more compared to just 13% less – a net 2-pt decline since May.Restaurant Spending is down 1-pt, while Autos are holding steady this month.

For the second month in a row the spending picture for most major retailers is little changed.

The one exception here is Walmart – which has registered a 1-pt uptick for the second consecutive survey.

Costco is once again the leader in terms of overall spending growth – unchanged from May.

We note Target (down 2-pts) has declined for the second month in a row.