Major demographic shifts are expected to reverberate in U.S. consumer spending over the next decade, according to a new report from The Conference Board.
The research, titled, “The Impact of Demographic Trends on Consumer Spending,” found that both the aging of Baby Boomers and a shift in immigration patterns will change spending patterns.
Baby Boomers are expected to shift toward health-care spending, as well as other activities centered on their homes, hobbies and pets. The consumption of products targeted at the older population within categories, such as personal-care products and travel, is expected to grow as well.
At the same time, older households will tend to spend less on men’s apparel, food away from home, rented homes and used cars.
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Population growth between ages five and 24 is expected to remain unchanged. While the large generation of Millennials is aging out of this group, the smaller Generation Z that follows won’t replace the Millennials. Also, because birth rates dropped during and after the Great Recession, The Conference Board predicted that spending concentrated in these age groups is likely to grow slowly at best.
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The report also noted that the U.S. is undergoing a major shift in immigration trends, with fewer immigrants from Latin America and more from other parts of the world, including Asia.
Domestic migration will also impact where consumers spend as retirees move. The report predicted New York, Illinois and the Washington metropolitan areas would likely lose a disproportionate number of their older and affluent residents. Further, the research group concluded that consumption in states such as Florida, Texas, Arizona and Nevada is expected to “grow more than the national average,” while states such as New York and Illinois will “barely see any growth at all.” The report noted that Rhode Island and Michigan will “actually experience negative consumption growth.”
Gad Levanon, The Conference Board’s chief economist for North America, said, “More accurate intelligence about future demand is an important advantage over competitors.”
While exact projections of demand are never certain, he said businesses should “grasp the opportunity to use what is known about demographic trends to make better business decisions.”
He explained that while the answer can vary across different industries, markets and companies, there are “certain factors that could be helpful in thinking through the strategy.”