US consumers started spending at increased rates in Q2 2021, giving shape to the next normal.
About the guest author(s)
Tamara Charm is a senior expert in McKinsey’s Boston office; Janette Hwang is a consultant in the New Jersey office; Andrea Leon and Daniela Sancho Mazzara are capabilities and insights analysts in the San Jose office; Nancy Lu and Jonathan Medalsy are consultants in the New York office, where Jason Rico Saavedra is a solution associate; Anirvan Maiti is a data analyst in the Waltham office; Kelsey Robinson is a partner in the San Francisco office; and Tom Skiles is a capabilities and insights expert in the Chicago office.
Given the recent surge of the Delta variant, we will continue to track changes in consumer sentiment and behavior as the next normal continues to evolve.
US consumer spend recovered in Q2 2021, driven by the confluence of increasing vaccination rates, stimulus payments in March 2021, an optimistic outlook toward economic recovery, and the general reopening of the economy. Consumers’ pent-up demand and willingness to spend in some discretionary categories caused spending to grow at 20 to 30 % year over year, reaching 4 to 7 % above pre-COVID-19 levels. While lower- and middle-income consumers drove much of the spend increase through the spring of 2021, we now see a change, with the recent increase coming primarily from higher-income groups.
Dotcom step change has stuck. E-commerce sales continue to experience outsized growth, with online penetration remaining approximately 35 %above pre-COVID-19 levels, and e-commerce showing more than 40 % growth over the past 12 months. At the same time, brick-and-mortar spending on retail categories has stayed relatively consistent during this whole period.
Disparate recovery across categories. Despite overall spend growth, retail channels have evolved into clear groups of spend performance, ranging from those experiencing continued large declines (including out-of-home entertainment such as theaters and amusement parks) to those seeing sustained elevated growth (such as spending on the home).
Loyalty shakeup continues. Consumers are again adjusting their behaviour as the economy reopens. As many as 30 to 40 % of consumers continue to switch brands or retailers, driven primarily by younger consumers seeking value, combined with greater emphasis on purpose-driven alignment and quality.
Homebody economy persists. Consumers and employers are adjusting to a “next normal” in remote work models. In addition to increasingly hybrid work models, we continue to see a corresponding shift in purchases and investments focused on home-based working and living. We expect to see this trend continue in the medium term.
These exhibits are based on third-party data provided in the United States between February 2019 and June 2021, as well as longitudinal surveys conducted between March 2020 and February 2021. Check back for regular updates on US consumer sentiments, behaviours, income, spending, and expectations.