The US Bureau of Labor Statistics recently published their consumer spending trends report based on age groups. This reports indicates that as the Baby Boomer generation ages, their overall spending decreases dramatically. Since consumer spending represents about 70% of Gross Domestic Product (GDP), any trend that affects it is important!
The chart below shows that spending peaks with the age 45-54 group and starts decreasing and by age 75 spending is 68% of average. As many young adults are launching at a later date, it is no surprise that the age group 25 and under is only 59% of average as let’s face it, most of the drop is for children who don’t have household expenses. The 25-34 year age group spends about 93% of average indicating that as a whole, Millennials are generally lower consumer spenders than their parents. The issue was particularly strong during the 2008 recession when all groups pulled back on spending. It also makes sense that consumer spending has not quite recovered because Boomers are reaching the age group that spends significantly less at a rate of 10,000 per day.
Assuming current trends continue, we should see the largest drop in spending starting around 2020 or so. However, a few years after that spending should begin to pick up as a significant percentage of Millennial entering the 35-44 age range. The economic fundamentals for consumer spending appear to be solid going into 2017. The labor market continues to strengthen, disposable personal income is edging up, and average hourly earnings have started to accelerate. Yes, the Baby Boomers are aging, but this generation has transformed every life-stage transition they’ve ever been involved with, and they’re likely to do the same for retirement.
For Similar Graphs Visit Bureau of Labor Statistics here