(Reuters) – Household spending has increased modestly in the past four months, but consumer expectations about how much they will be able to spend a year more from it has now risen, according to a poll 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 that consumers hope their financial situation will improve further as the coronavirus is contained.
The share of households who have made at least one large purchase in the past four months rose to 54.6% in December. That’s all from a series low of 50.7% in April 2020, but was still well below the pre-pandemic level of 62.5% in December 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 average household expecting spending to grow 3% in the next year, rising from 2.2% in August.
Households reported in December that they expect spending on daily expenses and other necessary bills to increase 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 expect spending on non-essential items like hobbies, entertainment, and travel to increase by an average of 1.6% over the next year, up from 1.0% in August and also reaching a maximum for the survey.
Surprised by a 10% increase in income, consumers said they would spend an average of 36.3% for debt repayment, 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 Consumer Expectations Survey.
Jonnelle Mars reporting; Editing by Chizu Nomiyama