Baby boomer parents are giving money to their Generation Z and Millennial children, allowing them to spend heavily, according to Meredith Whitney, the former “Oracle of Wall Street” who predicted the great financial crisis.
Despite the end of COVID-related stimulus measures and warnings from discounters such as Dollar Tree And Dollar-General While demand is weak, other data show more robust spending patterns in other areas of the economy.
In a Financial Times comment Last Sunday, the CEO of Meredith Whitney Advisory Group noted: American Express Data shows that Generation Z and Millennials spend five times more money than Baby Boomers.
“They have the cash to spend on things like coffee from the coffee press, Instagrammable leisure experiences, Online gaming and sports betting and yes, avocado toast,” she wrote.
Whitney found that for households with annual incomes over $100,000, net income remained virtually unchanged between 2019 and 2022.
At the same time, households with incomes above $150,000 have kept their spending relatively constant over the past year, even as their spending has shifted from non-essential to essential goods.
“The 24-38 generation represents 20% of the U.S. population and has the greatest purchasing power of any age group,” Whitney added. “They have benefited and continue to benefit from another type of support: their parents.”
These younger generations are living with their parents in record numbers, she said, adding that they receive subsidized expenses such as cell phone plans from their parents.
And since nearly 20 percent of men and nearly 12 percent of women ages 24 to 35 still live with their parents, they also don’t spend their money on housing-related expenses such as insurance, property taxes and utilities, Whitney emphasized.
“As long as these trends continue, this age group will remain the primary driver of discretionary spending in the U.S.,” she predicted. “It’s no wonder there is so much debate about the true state of the U.S. economy.”
Whitney’s analysis appeared days before the monthly Retail Sales Report posted a surprising upward trend, suggesting that consumers are still able and willing to spend more despite years of high inflation and borrowing costs.
She also repeated what “Bond King” Bill Gross said last month when he posted a similar opinion to Xbut without supporting data.
“Hard to measure, but I suspect the upper middle class and affluent baby boomers are funding the spending of millennials and younger generations by transferring wealth/cash and paying bills, stimulating retail and the economy in the process,” he wrote. “Essentially, they are liquidating balance sheets to fund their spending. This will likely continue as long as stock/housing prices remain high.”