Signs of Stretched Consumers

The plural of anecdote is not data. Broad macro trends will contain and obscure a multitude of micro stories within. But when a refrain is repeated widely, it merits investigation.

In recent months, we have noticed growing murmurs about consumers falling behind. Reports of slower spending have come from recent corporate earnings calls:

  • Restaurant CEO: “…signs of some consumers trading down within our brands.”
  • Apparel CEO: “And in the U.S….the consumer…is a little soft coming into the year.”
  • Hardware CFO: “The home improvement market still faces headwinds as we look ahead to fiscal 2024.”

Evidence of overstretched households is also emerging from the financial planning sector. In 2023, 3.6% of 401(k) account holders took an early withdrawal for economic hardship. These withdrawals require demonstrating an “immediate and heavy” financial need in order to not be taxed at punitive rates.