Fed: millennials are just like boomers… but poor
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Fed: millennials are just like boomers… but poor

A new study by the Federal Reserve has thrown common wisdom about the millennial generation into doubt. For what seems like an aeon, commentators have been claiming that millennials differ from the generations that precede them in a number of important ways, at least one of which has significant importance for consumer brands: millennials prefer experiences to things (hence ‘sharing economies’ and the like). Now, the Fed says different: they don’t like things less, millennials just have less money to spend on them!

Real average annual expenditures per household by age and generation

graph 03 millennials

Source (as per Bloomberg): Consumer Expenditure Surveys (1986 – 2016) from the Bureau of Labour Statistics and the PCE price index from the Bureau of Economic Analysis. Note: averages are based on the survey weights for the consumer unit (averaged over the 4 surveys) and the birth year of the head of household. Nominal purchases in each quarter are deflated with the chain price index for personal consumption.

The study’s authors, Christopher Kurz, Geng Li, and Daniel J. Vine, wrote: “We find little evidence that millennial households have tastes and preference for consumption that are lower than those of earlier generations, once the effects of age, income, and a wide range of demographic characteristics are taken into account.”

Rather than any inherent difference between the generations, the study’s authors claim that circumstance could be what drives millennials to lower levels of ownership. They say that the group’s earning power has been irreparably damaged by the financial crisis, as many millennials came of age during that period.

The group’s findings hold up even in more granular investigations over things like car- and house-ownership. According to the study, there is one other way in which millennials are like the people that came before them: preceding generations were also subject to the kind of theorising to which millennials have been subjected. The authors wrote:

A similar question was posed 20 years ago when Baby Boomer profligacy was being compared to the Silent Generation’s penchant for saving. Speaking to that debate, Sabelhaus and Manchester (1995) were able to separate fact from popular myth at the time and provided evidence that consumption had not increased as much as income, and that Baby Boomer asset accumulation had in fact outpaced that of the previous generation.”

Disclosure
Dominion holds a number of companies that are specifically positioned towards the millennial generation across its Global Trends range of Funds.


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