Americans 65 and older account for record share of spending and are less susceptible to interest rates
4 min
Why has consumer spending proven so resilient as the Federal Reserve has raised interest rates? An important and little-appreciated reason: Consumers are getting older.
In August, 17.7% of the population was 65 or older, according to the Census Bureau, the highest on record going back to 1920 and up sharply from 13% in 2010. The elderly aren’t just more numerous: Their finances are relatively healthy and they have less need to borrow, such as to buy a house, and are less at risk of layoffs than other consumers.
This has made the elderly a spending force to be reckoned with. Americans age 65 and up accounted for 22% of spending last year, the highest share since records began in 1972 and up from 15% in 2010, according to the Labor Department’s survey of consumer expenditures released in September.
“These are the consumers that will matter over the coming year,” said Susan Sterne, chief economist at Economic Analysis Associates.
“Our large share of older consumers provides a consumption base in times like today when job growth slows, interest rates rise and student-debt loan repayments begin again,” she said.
Seniors’ high spending propensities reflect health, wealth and perhaps lingering psychological effects of the pandemic.
“All my life it was, save for this, save for that,” said Maureen Green, 66, of Cape Cod, Mass. “Now there’s money in the bank and I’m spending in ways that bring me closer to friends and family than I did before.”
Green, a real-estate agent with four grown children living across the country, estimated she is spending 25% more and twice as much time traveling now compared with 2019. She recently traveled to Syracuse, N.Y., to catch a photo exhibit with friends, and toured Rhode Island with her son and his girlfriend.
“The one million Americans who didn’t survive Covid—that’s part of it. That taught me not to let time go by because before I know it, that time won’t be there anymore,” she said.
“The lifestyle of the senior has changed dramatically—they’re more active than ever,” said Marshal Cohen, chief retail adviser of Circana, a research firm specializing in consumer behavior. That has expanded the menu of recreation on which to spend, he said. “They’re riding e-bikes, they’re hiking, they’re traveling. And they’re doing these things for longer than they’ve ever been done.”
The average household led by someone age 65 and older spent 2.7% more last year than in 2021, adjusted for inflation, according to the Labor Department, compared with 0.7% for under-65 households. Spending by older households is up 34.5% from 1982, compared with 16.5% for younger households.
Comparable data isn’t available for 2023. However, consumers older than 60 reported spending 7.9% more in August than a year earlier, compared with a 5.1% increase among those age 40 to 60 and a 4.6% gain for younger consumers, according to a survey by the New York Fed. The data aren’t adjusted for inflation.
The growing yen to spend by the elderly is amplified by their sheer numbers. The unusually large cohort of baby boomers, the youngest of which are 59, are reaching their retirement years en masse.
American Cruise Lines, which gears its cruises toward older consumers, said it is seeing double-digit sales growth this year, driven largely by boomers. The Guilford, Conn., company this year added three ships to its fleet and expanded its season by a month for some popular routes.
“River cruising has traditionally attracted an older audience, and with more boomers retiring each year, we see both a rapid rate of growth and demand for longer experiences,” said Charles B. Robertson, the company’s president and chief executive.
Another factor in the elderly’s favor: relatively strong finances. Americans age 70 and older now hold nearly 26% of household wealth, the highest since records began in 1989, according to the Federal Reserve.
While economists still see a relatively high probability of recession in the coming year, Ed Yardeni, president and chief investment strategist of Yardeni Research, isn’t one of them. An important reason: By the Fed’s reckoning, baby boomers alone have now amassed $77.1 trillion in wealth. “There’s a $77 trillion-wide hole in the theory that consumers’ running out of pandemic savings will sink the economy,” he said.
They have less consumer debt, minimal student debt and are more likely to own their homes outright. Many of those who have mortgages refinanced at the unprecedented low in mortgage rates after the pandemic hit. They are also less likely to need to move due to an expanding family or a new job than Gen Z and Millennials, shielding them from the impact of rising housing costs.
Retirees also received an 8.7% cost-of-living-adjustment bump to Social Security payments in January, the largest single-year increase since 1981, and an automatic adjustment to offset last year’s 9.1% inflation peak.
These factors have cushioned seniors from the twin scourges of inflation and high interest rates. And since most of them are retired, seniors’ spending is less vulnerable to the rise in unemployment that many economists anticipate in coming quarters.
Subscription demand for the Cincinnati Opera’s summer festival this year was surprisingly strong and driven by older patrons, said Todd Bezold, director of marketing.
“Despite the multiyear trend in subscriptions going down, down, down in every art form, we went up this year—by 3%,” he said. That jump in demand came despite a sharp rise in ticket prices to account for several years of inflation. “The vast majority of our subscribers are baby boomers; we know that much.”
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Multinationals like Starbucks and Marriott are taking a hard look at their Chinese operations—and tempering their outlooks.
4 min
For years, global companies showcased their Chinese operations as a source of robust growth. A burgeoning middle class, a stream of people moving to cities, and the creation of new services to cater to them—along with the promise of the further opening of the world’s second-largest economy—drew companies eager to tap into the action.
Then Covid hit, isolating China from much of the world. Chinese leader Xi Jinping tightened control of the economy, and U.S.-China relations hit a nadir. After decades of rapid growth, China’s economy is stuck in a rut, with increasing concerns about what will drive the next phase of its growth.
Though Chinese officials have acknowledged the sputtering economy, they have been reluctant to take more than incremental steps to reverse the trend. Making matters worse, government crackdowns on internet companies and measures to burst the country’s property bubble left households and businesses scarred.
Now, multinational companies are taking a hard look at their Chinese operations and tempering their outlooks. Marriott International narrowed its global revenue per available room growth rate to 3% to 4%, citing continued weakness in China and expectations that demand could weaken further in the third quarter. Paris-based Kering , home to brands Gucci and Saint Laurent, posted a 22% decline in sales in the Asia-Pacific region, excluding Japan, in the first half amid weaker demand in Greater China, which includes Hong Kong and Macau.
Pricing pressure and deflation were common themes in quarterly results. Starbucks , which helped build a coffee culture in China over the past 25 years, described it as one of its most notable international challenges as it posted a 14% decline in sales from that business. As Chinese consumers reconsidered whether to spend money on Starbucks lattes, competitors such as Luckin Coffee increased pressure on the Seattle company. Starbucks executives said in their quarterly earnings call that “unprecedented store expansion” by rivals and a price war hurt profits and caused “significant disruptions” to the operating environment.
Executive anxiety extends beyond consumer companies. Elevator maker Otis Worldwide saw new-equipment orders in China fall by double digits in the second quarter, forcing it to cut its outlook for growth out of Asia. CEO Judy Marks told analysts on a quarterly earnings call that prices in China were down roughly 10% year over year, and she doesn’t see the pricing pressure abating. The company is turning to productivity improvements and cost cutting to blunt the hit.
Add in the uncertainty created by deteriorating U.S.-China relations, and many investors are steering clear. The iShares MSCI China exchange-traded fund has lost half its value since March 2021. Recovery attempts have been short-lived. undefined undefined And now some of those concerns are creeping into the U.S. market. “A decade ago China exposure [for a global company] was a way to add revenue growth to our portfolio,” says Margaret Vitrano, co-manager of large-cap growth strategies at ClearBridge Investments in New York. Today, she notes, “we now want to manage the risk of the China exposure.”
Vitrano expects improvement in 2025, but cautions it will be slow. Uncertainty over who will win the U.S. presidential election and the prospect of higher tariffs pose additional risks for global companies.
For now, China is inching along at roughly 5% economic growth—down from a peak of 14% in 2007 and an average of about 8% in the 10 years before the pandemic. Chinese consumers hit by job losses and continued declines in property values are rethinking spending habits. Businesses worried about policy uncertainty are reluctant to invest and hire.
The trouble goes beyond frugal consumers. Xi is changing the economy’s growth model, relying less on the infrastructure and real estate market that fueled earlier growth. That means investing aggressively in manufacturing and exports as China looks to become more self-reliant and guard against geopolitical tensions.
The shift is hurting western multinationals, with deflationary forces amid burgeoning production capacity. “We have seen the investment community mark down expectations for these companies because they will have to change tack with lower-cost products and services,” says Joseph Quinlan, head of market strategy for the chief investment office at Merrill and Bank of America Private Bank.
Another challenge for multinationals outside of China is stiffened competition as Chinese companies innovate and expand—often with the backing of the government. Local rivals are upping the ante across sectors by building on their knowledge of local consumer preferences and the ability to produce higher-quality products.
Some global multinationals are having a hard time keeping up with homegrown innovation. Auto makers including General Motors have seen sales tumble and struggled to turn profitable as Chinese car shoppers increasingly opt for electric vehicles from BYD or NIO that are similar in price to internal-combustion-engine cars from foreign auto makers.
“China’s electric-vehicle makers have by leaps and bounds surpassed the capabilities of foreign brands who have a tie to the profit pool of internal combustible engines that they don’t want to disrupt,” says Christine Phillpotts, a fund manager for Ariel Investments’ emerging markets strategies.
Chinese companies are often faster than global rivals to market with new products or tweaks. “The cycle can be half of what it is for a global multinational with subsidiaries that need to check with headquarters, do an analysis, and then refresh,” Phillpotts says.
For many companies and investors, next year remains a question mark. Ashland CEO Guillermo Novo said in an August call with analysts that the chemical company was seeing a “big change” in China, with activity slowing and competition on pricing becoming more aggressive. The company, he said, was still trying to grasp the repercussions as it has created uncertainty in its 2025 outlook.
Few companies are giving up. Executives at big global consumer and retail companies show no signs of reducing investment, with most still describing China as a long-term growth market, says Dana Telsey, CEO of Telsey Advisory Group.
Starbucks executives described the long-term opportunity as “significant,” with higher growth and margin opportunities in the future as China’s population continues to move from rural to suburban areas. But they also noted that their approach is evolving and they are in the early stages of exploring strategic partnerships.
Walmart sold its stake in August in Chinese e-commerce giant JD.com for $3.6 billion after an eight-year noncompete agreement expired. Analysts expect it to pump the money into its own Sam’s Club and Walmart China operation, which have benefited from the trend toward trading down in China.
“The story isn’t over for the global companies,” Phillpotts says. “It just means the effort and investment will be greater to compete.”
Corrections & Amplifications
Joseph Quinlan is head of market strategy for the chief investment office at Merrill and Bank of America Private Bank. An earlier version of this article incorrectly used his old title.
