Lower energy, housing and food prices are forecast to contribute to the easing of inflationary pressures in the US in 2024. However, rising prices of services will leave consumers cautious on spending despite the improving macroeconomic conditions. Companies understanding these consumer insecurities and providing a stronger value proposition can gain an advantage and prepare for long-term growth.
Lower prices of essential items help to ease inflationary pressures
Inflationary pressures in the US are easing, with inflation forecast to stand at 2.6% in 2024
Source: Euromonitor International
Stabilisation of the energy prices, stricter monetary policies, and lower food prices are helping to ease the inflation.
Stricter monetary policies combined with strong inventories of the new housing are also helping to ease housing price pressures, one of the key categories that inflated consumer living costs in 2022. As a result of higher mortgage rates that restrict the demand and stable supply of new housing, the house price index in the US is forecast to decline slightly in 2023. However, housing price discrepancies across urban areas are set to prevail. For example, around 40% of new rental projects in the US completed in 2023 will be concentrated in the 10 metropolitan areas with the highest growth of job openings, while supply in other regions continues to stagnate.
However, despite the easing of inflationary pressures, US consumers are still predicted to feel pressures on their purchasing power in 2024. Per capita disposable income expanded by 2.1% in real terms in 2023 and is forecast to show a moderate increase of 0.5% in 2024. Tight labour markets and consequently growing wages continue to add inflationary pressures in the services sector and erode consumer income gains. As a result, US consumers are likely to continue to adjust their spending patterns in 2024.
Consumers in the US remain cautious and prudent
In the US, consumer spending patterns for 2024 are shaped by a landscape of uncertainty – encompassing social, economic, political, and geographical factors. This is driving consumers to adopt a cautious approach to their finances, with two in five respondents from the US agreeing to increase money saving in the next 12 months, according to Euromonitor International’s Voice of the Consumer: Lifestyles Survey 2023.
The hard-learned lessons from the pandemic and the absence of universal healthcare have elevated health goods and medical services to the forefront of consumer expenditures
Source: Euromonitor International
Hospital services, outpatient care, and medical equipment are expected to maintain their status as critical spending categories. Additionally, consumers are proactively safeguarding their future, with a notable focus on financial security. This will translate into expenditure on insurance and financial services, categorised under miscellaneous goods and services. Within essential spending categories, housing will continue to command a significant portion of the consumer wallet. In this environment, consumers are prioritising both their wellbeing and their financial stability.
For businesses seeking to navigate these consumer preferences, understanding these insecurities and needs is paramount
Source: Euromonitor International
They must become trusted allies of consumers, offering not only high value but also accessibility. Companies that focus on creating win-win strategies now will reap the rewards in the future. By enhancing value proposition and prioritising affordability, they can build brand goodwill and expand their consumer base, ensuring their success in a dynamic and uncertain landscape. It's a call to action for businesses to adapt, empathise, and thrive alongside their cautious consumers.
Further insights into the cost-of-living crisis are available at A Look at the Cost of Living Around the World and Understanding the Cost-of-Living Crisis: Raising Prices Is Not an Effective Strategy.