As Apple goes, so does household spending in the United States.
Specifically: The money that has accumulated during the pandemic, lining the bank accounts of individuals and families, underpinning retail sales (especially online), is now directed to the most urgent expenses .
Perhaps this could come at the expense of discretionary buying – at least on once ‘must-have’ items – in an uncertain environment where the Omicron virus is making headlines. What was once the ‘I have to have it now’ shopping, until the start of the holiday season, could be marked by a state of mind that screams ‘can be put off – maybe for a long time’ .
Case in point: last week’s warning from tech giant Apple to its suppliers noting declining demand for the iPhone 13. This warning, first reported by Bloomberg last week, suggests a bit of a shock with the price tag of $ 999.
Notifying suppliers, like Apple did, would apparently have a top-down impact on supply chains, where production slows down, so the phones themselves don’t end up clogging the shelves (and driving , inevitably at lower prices to move inventory). But the withdrawal, whether short-term or long-term, has implications far beyond the limits of consumer electronics.
What goes up, as they say, must come down. And where consumer spending has been high and resilient during the pandemic, it may necessarily need to take a break. Consumer spending, after all, is heavily influenced by psychology.
If we are confident about our current and future prospects – job security, reliable income streams and purchasing power (which is linked to inflation) and health – we are more likely to spend what is in our pockets. collective. If any of these key “pillars” of consumer confidence were found to be insufficient or weakened, spending would, unsurprisingly, also weaken.
Pressure on paycheck consumers
The pressure may be felt most acutely by paycheck consumers who currently constitute the majority of the American population. As detailed in the latest report, produced in collaboration between PYMNTS and LendingClub, the percentage of the population struggling to make ends meet reached 57% in the most recent reading, up from around 52% previously. Of this population, 62% of the more than 2,000 consumers surveyed said they were “very concerned” about the pandemic. This statistic was collected before news of the Omicron variant rocked the markets in recent days; it stands to reason that these concerns could gradually increase and affect consumer confidence.
Read more: Rise in paycheck-to-paycheck life mostly linked to financial fears
Scott Sanborn, CEO of LendingClub, told Karen Webster in a recent conversation that paychecks don’t go as far as they used to be. The pinch comes against a backdrop of inflation, a return to work (in office automation, with hybrid models) and the drying up of various forbearance programs that could inject renewed spending levels into the monthly cash flow equation.
Student loans, for which the federal forbearance program is due to expire at the end of January 2022, are among these expenses. The Federal Reserve Bank of New York estimated last month that U.S. credit card debt rose $ 17 billion in the quarter, the second consecutive quarterly increase. In other words, we are bringing more debt into the household balance sheet.
Mortgage balances – the main component of household debt as detailed by the Fed – rose $ 230 billion to $ 10.7 trillion at the end of September. “In total, non-housing balances increased by $ 61 billion, with gains for all types of debt,” the New York Fed noted. Analyzing student loans, the Fed said outstanding student loans stood at $ 1.58 trillion in the third quarter, an increase of $ 14 billion from the second quarter.
About 5.3% of total student debt was over 90 days past due or in default in the third quarter of 2021. Depending on how consumers juggle their obligations, we might see upward pressure on these metrics. For now, at least, and as the holiday shopping season approaches, expensive gadgets may not be a priority – certainly not for those living in the paycheck-to-paycheck economy. pay.
See Also: Fed Debt Data Report Indicates Pressure For Paycheck-To-Paycheck Consumers