Non-Material Millennials

Executive Summary

Over the course of the past several years, there have been noticeable shifts in the composition of consumer spending. While there are both cyclical and structural factors that have influenced consumer spending decisions in recent years, in our view, a changing demographic landscape is playing a role in shaping the way consumers are spending today. In this report, we will highlight some of the unique spending patterns by sector that have emerged over the past several years and how these spending patterns align with unique tastes and preferences of particular age groups.

We highlight that one of the key factors affecting aggregate changes in consumer spending is related to distinct taste and preference changes among younger demographic groups. In particular, our examination of spending behavior for the largest and most diverse generation, Millennials (ages 18-34), shows that this generation tends to focus more on experiences such as dining out and spending on entertainment rather than owning a large number of assets relative to other generations. While more time is needed to draw any final conclusions on how different spending habits of the Millennials generation will be, initial evidence suggests that there are distinct differences that firms in the consumer space should recognize, especially now that Millennials are playing a more prominent role in the macroeconomy.

Changing Patterns of Consumer Spending

Detailed annual consumer spending data released from the U.S. Department of Labor for 2015 indicate that average consumer spending per consumer unit rose 4.6 percent from 2014.1 The fastest expenditure growth among the major categories was observed for personal insurance and pensions, education expenditures, transportation and entertainment. To gauge momentum behind some of these spending categories, we compared the year-over-year growth rate of each major consumer spending category to the change in spending for that category over the past three years. As can be seen in Figures 1 and 2, there is surprising consistency in the categories expanding the fastest, including health care, rental housing, food away from home and entertainment.

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