Slow Growth In Consumer Spending, Cities Concerned?

Research shows that consumers’ everyday spending on most goods and services in 15 major U.S. metropolitan areas has slowed dramatically, from 5% in the second quarter of 2014 to 0.5% in the comparable period in 2015.

DATA BREAKDOWN

Local consumer commerce is a function of the age and income of the consumer, the types of product sold by a business, the size of that business, and the distance between a consumer’s home and the location of a business.

The overall slowdown in consumer business was driven mainly by a slowdown in spending among higher-income and older consumers. Young consumers; however, continued to exhibit a healthy growth rate. Additionally, spending among low-income consumers is still rising, albeit at a slower rate.

These spending habits are certainly influenced by wages, and income from wages rise and fall depending upon the age of consumers. As workers advance in their careers, their income tends to rise as a result. As those same workers near or enter retirement, income will decline accordingly.

Source: JP Morgan Chase & Co.

The Institute found that residents spent less from businesses in their own neighborhoods over the past year. The growth rate of Intra-neighborhood consumer previously experienced a 9% growth rate between the Q2 2013 to Q2 2014, but the rate of growth remained flat between Q2 2014 and Q2 2015. In contrast, purchases by out-of-town consumers from local businesses rose. However, since local spending by out-of-town consumers represent such a small share of overall metropolitan spending, the growth in out-of-town local spending did not offset slowdown within in-town local spending.

Source: JP Morgan Chase & Co.

Spending growth at large businesses exhibited a dramatic decline, falling 1% between Q2 2014 and Q2 2015 after growing at a rate of 7% from Q2 2013 and Q2 2014. Large businesses exhibit an over-sized impact on overall spending. Although large businesses make up less than 1% of all businesses, they account for 33% of all consumer commercial spending. Spending at small and medium-sized businesses slowed, albeit at a smaller rate than the decrease in spending at large businesses, and only reported a 0.3% growth rate.

Source: JP Morgan Chase & Co.