The Multigenerational Spending Collapse

It's no secret that boomers fearing an underfunded retirement have sharply cut spending. However, it's not just boomers cutting back. Consumer attitudes toward debt have changed across all age groups.

A recent Gallup Poll shows just how dramatic a spending shift has taken place. Please consider Boomers’ Spending, Like Other Generations’, Down Sharply.
 

"Baby boomers' self-reported average daily spending of $64 in 2009 is down sharply from an average of $98 in 2008. But baby boomers -- the largest generational group of Americans -- are not alone in pulling back on their consumption, as all generations show significant declines from last year. Generation X has reported the greatest spending on average in both years, and is averaging $71 per day so far in 2009, down from $110 in 2008."

Self-Reported Spending


Click to enlarge

Population Share by Age Group


Click to enlarge

The chart shows boomers and Generation X are the two largest demographic groups. Spending is down by 34.7% among boomers and 35.4% in Generation X. Spending is down by 33.7% in generation Y, the third largest demographic group. That's a remarkably consistent decline in spending.

Spending by the "Greatest Generation" is down a whopping 44%, but that group only constitutes 5% of the population.

Here are some more interesting charts from the article.

Annual Incomes -- Boomers versus Generation X


Click to enlarge

Surprisingly, annual incomes are nearly identical for boomers and Generation X. However, Generation Y income is dramatically less as the following chart shows.

Annual Incomes -- Boomers versus Generation Y


Click to enlarge

The bottom line is:
 

"Baby boomers have pulled back considerably on their spending this year, but they are not alone in doing so. Gallup finds significant declines among all generations in average reported daily spending in 2009 compared to 2008. Given that consumer spending is the primary engine of the US economy, it's not clear how much the economy can grow unless spending increases from its current low levels. But spending may not necessarily be the best course of action for baby boomers as they approach retirement age and prepare to rely on Social Security and their retirement savings as primary sources of income. Indeed, the two generations consisting largely of retirement-age Americans consistently show the lowest levels of reported spending."

I can add to those thoughts. Boomers and Generation X are loaded to the gills with debt. Boomers in particular are downsizing, and income growth is stagnating across the board.

Moreover, boomers headed into retirement are scared half to death about insufficient funds. Those boomers aren't about to go on a spending spree.

Please consider the Incredible Shrinking Boomer Economy.