To flesh out the picture of how consumers in the region are thinking, we analyzed September 2019 data from our US Consumer Sentiment Survey, covering more than 4,500 consumers. The survey is part of our Global Consumer Sentiment Survey of more than 22,000 people, which has run annually since 2008 in the United States and since 2015 globally.
US results show that feelings of financial pressure are at their lowest levels since the recession, and few consumers cut back on spending. Only 39 percent of consumers feel financial pressure today, compared with 77 percent in 2009; just 27 percent are cutting back on spending today, versus 63 percent during the recession (Exhibit 1).
Even though consumers have no plans to cut back on spending, they are still price sensitive and use multiple strategies—such as using coupons and shopping around—to save (Exhibit 2).
While thrifty, consumers are increasingly willing to trade up to more expensive, often premium, products: 11 percent of respondents today are willing to trade up, as opposed to just 7 percent in 2016. In food, consumers are inclined to trade up in the fresh and ready-made-meal categories, such as dairy-free milk, fresh produce, and chilled meals. In good news for premium brands, these consumers are happy with their choice, as 81 percent of respondents prefer the higher-priced product and believe it to be worth the extra money.
Of all consumers, millennials are particularly prone to trade up. Strikingly, they are 2.5 times more likely than baby boomers to do so (Exhibit 3).
This gain in trading up, however, is offset by a steady rate of trading down, at 9 percent—a rate that has stayed consistent since 2015. Two-thirds of respondents who trade down buy private-label goods, and 70 percent of them are satisfied with their choice and do not intend to trade back up, making it hard for national brands to win them back. Relative pricing is key for these consumers when they consider whether to trade back up after trading down.
Yet another continuing trend is consumers’ increasing preference for healthier products (Exhibit 4). This trend is especially strong among top-tier consumers (households earning more than $100,000 annually): 20 percent of them report buying more natural or organic products in the past 12 months, and 15 percent report buying more locally sourced products in that time period.
In addition to tracking ongoing trends, this year’s study uncovered some noteworthy new findings. First, distrust of big-name brands influences consumers’ shopping behavior: 70 percent of respondents believe that large food companies put their own financial interests ahead of consumers’ interests, while only 46 percent believe this to be true of smaller food companies. This belief will continue to fuel sales growth at small companies, which consumers perceive to be more attuned to trends and consumer needs.
Second, consumers are taking an interest in the environmental impact of product packaging. Millennials are particularly disposed to this consideration: 71 percent of them take sustainable packaging attributes into account in their purchasing decisions, as opposed to just 57 percent of baby boomers.
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Overall, there’s good reason for optimism this holiday season, thanks to a booming US economy. In fact, a third of consumers plan to spend more during this holiday season than they did last year, according to another McKinsey study, the 2019 Holiday Season Shopping Report. Millennial and Gen Z shoppers express the strongest desires to increase their budgets, the report says.
Looking ahead to 2020, while some indicators (for example, manufacturing, yield curve, GDP growth) have economists understandably concerned about a recession, the work here on the sentiments of US consumers shows consumers have not yet translated those concerns into plans to cut back their spending.
About the author(s)
Anne Grimmelt is a senior expert in McKinsey’s Stamford office, Max Magni is a senior partner in the New Jersey office, and Alex Rodriguez is a partner in the Miami office.
The authors wish to thank Viviana Aguilar and Karina Huerta for their contributions to this article through their work on the global survey.