November 2016

As the holidays approach, we wanted to share some intriguing trends on the U.S. consumer. Since the Great Recession, we have observed several changes in consumption patterns including the preference to spend on experiences over things, to improve personal finances and to bargain hunt. We’ve identified three key themes. Today’s U.S. consumers are healthy, more wealthy and they are wise.

The U.S. consumer and experience economy are healthy. Despite mixed reports, U.S. consumer spending has remained robust. According to the Department of Commerce, personal consumption expenditures (PCE), the primary driver of future economic growth and nearly two-thirds of domestic spending, rebounded in September to an annualized rate of $12.8 trillion as personal incomes also improved (+3.2% year-over-year or yoy). This is driven by a tighter labor market, with October wage growth of +2.8%—the fastest pace since 2009. In addition, the unemployment rate fell to 4.9% adding 161,000 jobs to the economy, led by the service sector.

Since the Great Recession, Westwood has observed an important shift toward experiential purchases and away from material acquisitions. Numerous happiness studies show that the anticipation before and memories after an experience give people greater satisfaction than possessions, which provide a rush of gratification that quickly fades once constant exposure is established. Even bad experiences can become good memories and provide valuable insight, and experiences are often shared to enhance a sense of social connection and well-being.

Year-on-year spending on the experience economy is strong including summer vacations (+11%), dining out (+7.5%), gardening and home projects (+6.2%), National Parks (+5.7%), theme parks (+4.8%), home entertainment (+3.8%), concerts, movies, outdoor sports and fitness. Conversely, spending on apparel (+0.1%) and electronics (-3.1%) continues to lag.

One of the largest social networks just released a study of 12 million members showing that active users live longer, healthier lives than their offline peers. At Westwood, we continuously monitor our data sources for investable long-term trends backed by powerful secular forces. The lasting memory of the Great Recession combined with the rise of social media has put a premium on living experience-rich lives shared with others, and we expect experiential categories to see strong gains for many years to come.


A second powerful shift has been the improvement of consumer balance sheets. Consumers have higher credit scores and net worth than ever before, a result of rising asset values, higher savings and less debt. In 2016 the average U.S. credit score reached a record high of 699 with a record 20.4% of Americans reaching super-prime status with a score of 800-850. Since mid-2008, the savings rate has experienced a positive change, increasing from 4.0% to 5.7% of Disposable Personal Income (DPI). In Q2 16, U.S. household and nonprofit net worth rose to a record $89.1 trillion. The majority of Americans (62%) are also living within their means. The average percentage of people holding credit card debt has been gradually decreasing. While greater than 50% of U.S. households held revolving credit card debt in 2000, that figure has fallen to 38.1% today. While more household debt was accumulated between 2001 and 2007 than in the previous 45 years, since 2007 the household debt to GDP ratio has declined from 99% to below 80%.

One exception to the increase in experiential spending is that consumers are investing in their homes as equity grows. While 23.7% of U.S. homeowners were underwater at the beginning of 2012, that figure is just 8% today. Over the past year, the metro areas in the country with the largest increase in the share of equity-rich homeowners were Dallas (+46%), Austin (+39%) and Denver (+37%). Westwood believes the stronger U.S. consumer will serve the economy well at this late stage of the business cycle.

A third disruption since the Great Recession is the “Shift to Thrift.” Bargains that once made people feel poor now make them feel wise. The new, smarter U.S. consumer is still shopping for goods, just not at full price. In the face of over-choice and time constraints, consumers are simplifying their lives and progressively shopping online for a broad selection, price transparency and convenience. This has caused a drop in retail traffic so that consumers visit an average of 9.7 stores per month, down from 12.4 in 2007. This trend is amplified each year during the holidays, when people buy more gifts that do not have to be tried on. We expect this holiday season to be no exception and expect online spending to grow for many years to come.

As part of the “CNN effect,” 43% of consumers reported spending less ahead of the U.S. presidential election. With the uncertainty of the race behind us, consumer confidence is near an eight-year high, we expect consumers to increase their spending this holiday season. As consumers continue to condense their shopping trips into fewer weekend days and holidays per year, we continue to focus on retailers that own great brands, have a small store footprint and have a strong online presence.

By maintaining patience, a long-term perspective and a focus on high-quality businesses in a market increasingly distorted by high-frequency trading and indiscriminate Exchange Traded Fund or ETF purchases, Westwood remains well prepared for any market. Despite headwinds from rising health care costs and rent expenses, since the Great Recession the U.S. consumer has increased in health, wealth, and wisdom and Westwood wishes you all the same in the New Year.



For more information, please contact:
Dallas: Randy Root at 214.756.6900 or
Houston: Bill Cunningham at 713.683.7070 or
Omaha: Art Burtscher at 402.393.1300 or




The information contained herein represents the views of Westwood Holdings Group, Inc. at a specific point in time and is based on information believed to be reliable. No representation or warranty is made concerning the accuracy or completeness of any data compiled herein. Any statements non-factual in nature constitute only current opinion, which is subject to change. Any statements concerning financial market trends are based on current market conditions, which will fluctuate. Past performance is not indicative of future results. All information provided herein is for informational purposes only and is not intended to be, and should not be interpreted as, an offer, solicitation, or recommendation to buy or sell or otherwise invest in any of the securities/sectors/countries that may be mentioned.