In short
U.S. consumer spending is resilient in the near term but confidence is deteriorating, driven by inflation, geopolitics, and U.S. political concerns; discretionary demand is weakening while essentials hold up.
Guest backgrounds
No external guests mentioned; host is Michelle Weaver, Morgan Stanley’s U.S. thematic and equity strategist.
Key claims
Net spending outlook is +18% (34% expect to spend more vs 15% less), but confidence drops with a net outlook of -17% (nearly half expect the economy to worsen). Inflation concern cited by 57%; geopolitical concerns rise to 33%; U.S. political concerns at 43%.
Notable examples
Essentials spending up (groceries, gasoline, household items); discretionary categories down (apparel -16%, domestic travel -11%, international travel -14%). Tax season: 46% expect larger refunds; about half plan to save, ~1/3 pay down debt, ~30% spend on everyday purchases.
Written by AI. May contain mistakes. Listen to the episode to check what was said.
Chapters
Tap a time to open that second in VOCurrent Consumer Sentiment
0:45 to 2:16
Exploring mixed signals in consumer spending and confidence levels.
“And our survey work reveals around 34 % expect to spend more next month compared to just 15 % who expect to spend less.”
Spending Trends and Caution
2:16 to 3:43
Analyzing how current trends in spending reflect consumer caution and priorities.
“We're also seeing that caution show up in the mix of expenditures.”
Transcript
Automatic transcript. May contain errors.0:00Welcome to Thoughts on the Market. I'm Michelle Weaver, Morgan Stanley's U.S. thematic and equity strategist. Today we're bringing you an update on the U.S. consumer as we try and understand the outlook for the economy. It's Thursday, April 9th at 10 a.m. in New York. You've probably noticed shopping these days feels like a mixed bag. You spend money on your everyday staples like groceries, personal care, or clothes. But you might be second-guessing those big-ticket items like a new piece of furniture or a new TV. And you're not alone. Our newest AlphaWise survey of U.S. consumers reveals a pretty mixed signal.
0:40On the surface, things look solid. Consumers are still spending. We've seen that borne out in some of the recent economic data. And our survey work reveals around 34 % expect to spend more next month compared to just 15 % who expect to spend less. This leaves us with a net spending outlook of positive 18%, which is actually above the long-term average. But when we start to dig in and look beneath the surface, the story shifts. Confidence is deteriorating. Nearly half of consumers expect the economy to get worse over the next six months, while only 32 % expect an improvement. This results in a net outlook of negative 17%, a meaningful drop from what we saw last month.
1:23So how do we reconcile that spending with that deterioration in confidence? It's really a balance of timelines. Consumers are spending today, but they're increasingly worried about tomorrow. And these worries are grounded in very real concerns. Inflation remains the dominant issue, with 57 % of consumers citing rising prices as a key concern, reversing what had been a fairly short-lived improvement on consumers' view on prices. At the same time, of course, with the tensions in the Middle East, geopolitical concerns are increasing quickly. They've jumped to 33 % from just 22 % last month. And concerns around the U.S.
2:05political environment remain elevated at 43%. When you combine all these pressures, it's not surprising that consumers are becoming more cautious in how they plan to spend. We're also seeing that caution show up in the mix of expenditures. In the near term, consumers are still increasing spending across most categories, especially the essentials like groceries, gasoline, and household items. But when we look over a longer horizon, the outlook becomes more selective. Discretionary categories are weakening. Apparel spending expectations have dropped to negative 16 percent, domestic travel to negative 11 percent, and international travel to negative 14 percent.
2:48That shift from discretionary to essentials is something we tend to see when consumers are bracing for a more uncertain environment. Now, one factor that's supporting the near term, a brighter spot here, is tax season. This year, 46 % of consumers expect to receive a larger tax refund compared to last year. And what's interesting about that is where people are going to put the money. About half of consumers plan to save at least a portion of their refund. About a third plan to pay down debt. and only around 30 % intend to spend it on everyday purchases. So even when people receive a cash boost, the instinct isn't to spend freely, it's to shore up finances.
3:28Putting this all together, the picture for the U.S. consumer today is one of resilience, but also rising caution. Spending is holding up in the near term, supported by income and tax refunds, but confidence is weakening, savings behavior is increasing, and discretionary demand is softening. These divergent trends are important. We'll continue to watch them closely and bring you updates. Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share thoughts on the market with a friend or colleague today. The preceding content is informational only and based on information available when created.
4:05It is not an offer or solicitation, nor is it tax or legal advice. It does not consider your financial circumstances and objectives and may not be suitable for you. Thank you.
From the publisher
Our U.S. Thematic and Equity Strategist Michelle Weaver breaks down the results of a new survey on U.S. consumer spending and confidence.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Michelle Weaver, Morgan Stanley’s U.S. Thematic and Equity Strategist. Today, we’re bringing you an update on the U.S. consumer as we try and understand the outlook for the economy.
It’s Thursday, April 9, at 10 AM in New York.
You’ve probably noticed shopping these days feels like a mixed bag. You spend money on your everyday staples like groceries, personal care or clothes. But you might be second-guessing those big ticket items like a new piece of furniture or a new TV. And you're not alone. Our newest AlphaWise survey of U.S. consumers reveals a pretty mixed signal. On the surface, things look solid. Consumers are still spending. We’ve seen that borne out in some of the recent economic data. And our survey work reveals around 34 percent expect to spend more next month, compared to just 15 percent who expect to spend less. That leaves us with a net spending outlook of +18 percent, which is actually above the long-term average.
But when we start to dig in and look beneath the surface, the story shifts. Confidence is deteriorating. Nearly half of consumers expect the economy to get worse over the next six months, while only 32 percent expect an improvement. This results in a net outlook of -17 percent, a meaningful drop from what we saw last month.
So how do we reconcile that? That spending with that deterioration in confidence. It’s really a balance of timelines. Consumers are spending today, but they’re increasingly worried about tomorrow. And these worries are grounded in very real concerns. Inflation remains the dominant issue, with 57 percent of consumers citing rising prices as a key concern – reversing what had been a fairly short-lived improvement on consumers' view on prices.
At the same time, of course, with the tensions in the Middle East, geopolitical concerns are increasing quickly. They’ve jumped to 33 percent from 22 percent just last month. And concerns around the U.S. political environment remain elevated at 43 percent. When you combine all these pressures, it’s not surprising that consumers are becoming more cautious in how they plan to spend.
We’re also seeing that caution show up in the mix of expenditures. In the near term, consumers are still increasing spending across most categories – especially the essentials like groceries, gasoline, and household items. But when we look over a longer horizon, the outlook becomes more selective. Discretionary categories are weakening. Apparel spending expectations have dropped to -16 percent, domestic travel to -11 percent, and international travel to -14 percent. That shift – from discretionary to essentials – is something we tend to see when consumers are bracing for a more uncertain environment.
Now, one factor that’s supporting the near-term – a brighter spot here – is tax season. This year, 46 percent of consumers expect to receive a larger tax refund compared to last year. And what’s interesting about that is where people are going to put the money. About half of consumers plan to save at least a portion of the refund. About a third plan to pay down debt. And only around 30 percent intend to spend it on everyday purchases. So even when people receive a cash boost, the instinct isn’t to spend freely. It’s to shore up finances.
Putting it all together, the picture of the U.S. consumer today is one of resilience but also rising caution. Spending is holding up in the near term, supported by income and tax refunds. But confidence is weakening, savings behavior is increasing, and discretionary demand is softening. These divergent trends are important. We’ll continue to watch them closely and bring you updates.
Thanks for listening. If you enjoy the show, please leave us a review wherever you listen and share Thoughts on the Market with a friend or colleague today.