From Home Furnishing Business
Statistically Speaking: Generation X and Millennials Gaining Influence as Baby Boomers Age
As Baby Boomers (ages 52 to 70 in 2016) are aging out of prime furniture buying years, Generation X households (ages 36 to 51) who are more affluent than ever have picked up the reigns with robust consumer spending – despite a much smaller population size. Couple the Gen Xers with the sheer population size of the Millennials (ages 35 and below in 2016) and the future for the furniture and home furnishings industry looks promising as more Millennial consumers age into adulthood and form households (Figure 1). It is estimated that in 2016, well over one third of Millennials had yet to form their own households, many still in college and others delaying household formation for various personal and financial reasons. The 2016 Consumer Expenditure Survey gives a snapshot of the five adult generations as shown in Figure 1 which also discusses the conflicting end year to be included as a Millennial. This article picks up from Statistically Speaking’s February 2015 article Age Shift Impacts Furniture.
Baby Boomers still have the highest number of households representing 34.8 percent of consumer units, compared to 27.5 percent for Generation X, and 22.9 percent for the up and coming Millennials. Though smaller in size than the Baby Boomers, Generation X continues to gain influence and make its mark in the U.S. economy alongside the fanfare of Millennials entering adulthood and peak buying years.
In 2016, U.S. Households spent $7.42 trillion in the U.S. economy with Baby Boomers controlling 37.2 percent of all total consumer expenditures and Generation X close behind at 32.8 percent. Millennials, with lower average household incomes and smaller numbers, control only 19.4 percent of the total (Table A). Regardless, with almost 10 million more consumer households, Baby Boomers still outspend Generation X – despite growing incomes for Gen Xers.
For Furniture and Bedding expenditures, Millennials are stepping up to spend more of their income on home furnishings than any other generation, but still control only 22.4 percent of industry sales. Generation Xers are closing in on Baby Boomers as the generation that controls more industry sales, 34 percent, compared to 34.7 percent for Boomers. As Baby Boomers age out of the furniture industry, the influence of Gen Xers and Millennials will continue to grow.
As shown in Table B, Generation X had an average household income (before taxes) of $95,168 last year, the highest mean household income of any generation in history. Gen Xers households earnings on average are 19 percent higher than Baby Boomer households and 45 percent more than Millennials. Of importance is that Generation X has the highest number of earners per households, 1.7 earners, compared to Millennials, 1.5 earners. As Millennials age and grow in the workforce, rising incomes paired with numbers of consumers will increase their 19.4 percent share of consumer spending dramatically.
With the highest incomes and an average age of 43.3, Generation Xers are prime consumers (Table C). At an average age of 60, many Baby Boomers have retired, while a majority of Millennials who have entered the workforce are gaining more purchasing power at an average age of 28. In fact Millennials have now surpassed Gen Xers in the number of individuals in the U.S. workforce.
Shown in Table D, Generation X represents the bulk of families with children. They have an average of 3.2 total people per household and 1.2 children under 18. Millennials, however, are starting to have children at a higher pace averaging 0.9 kids under 18 per household – bumping up the average size of a Millennial household to 2.6. Baby Boomers still have an average of 2.1 persons per households, most likely reflecting leftover Millennials still at home for younger Boomers.
As would be expected, only 33 percent of Millennial households are homeowners, but that number is increasing daily. Generation X has not quite embraced homeownership like their parents, with 62 percent owning their own residence compared to 76 percent of Baby Boomers (Table E).
As shown in Table F, ethnic diversity continues to grow the younger the generation. For heads of households, Hispanics or Latinos have become the second largest segment after Whites, Asian, and all other races – increasing from 9 percent of Baby Boomers to 18 percent of Generation X and Millennials in 2016.
The data continues to confirm that Millennials are the most educated generation. In 2016, 71 percent of Millennials were college educated versus 69 percent of Gen Xers and 63 percent of Baby Boomers (Table G).
Although Baby Boomers account for a greater percentage of consumers’ spending, Generation X consumers spent more per household with an annual average expenditure of $68,532 in comparison to the $61,204 of Baby Boomers (Table H).
Staying in line with overall expenditures, Generation X also spent more money per household on Furniture Expenditures in 2016. At an average annual furniture expenditure of $744, Generation X spends on average 24 percent more than Baby Boomers and 26 percent more than Millennials. (Note: The Consumer Expenditure Survey (CEX) projects total furniture industry expenditures at a lower rate than the Personal Consumer Expenditures (PCE) survey conducted by the Bureau of Economic Analysis, which is tied to the GDP. Mapping the CEX to the PCE reflects a more accurate picture of expenditures shown in Table I.)
Where Do Different Generations Spend Money?
Age and generation greatly affect what consumer items people buy and the share of a consumer’s total expenditures allotted for these items. Figure 2 illustrates a few major consumer items bought by each generation and which generation spends a higher percentage of their expenditures on those items.
As housing is a major expenditure for all consumers, Millennials are spending a higher percentage (22 percent) of their income on rent or mortgage payments. For rent alone, 37.6 percent of total spending comes from Millennials. For homeowners, Generation X spends the highest share of their expenditures on mortgage interest (6.6 percent). As they age, many Baby Boomers are paying off mortgages and simultaneously becoming by far the largest consumers of home maintenance, repairs and insurance. Last year 45 percent of these consumer expenditures were by Baby Boomers.
Millennials spend more of their income eating out than any other generation but due to population size, Gen Xers and Baby Boomers control almost 70 percent of the total dollars spent. In family-oriented Generation X, households on average spend far more than any other generation on entertainment – roughly 38 percent of total entertainment expenditures.
Cell phones, vehicles, and education are bigger ticket items for Millennials, while Gen Xers and families spend more of their incomes on apparel and shoes. Not surprisingly, Baby Boomers control much of the healthcare spending, averaging 9 percent of their consumer spending.
Perhaps the most important statistics for the furniture industry is that while Millennials currently control 22.4 percent of furniture industry sales, they also spend a higher percentage (0.9 percent) of income on furniture than any other generation. This should bode well for the industry as Millennials continue to flood into household formations. Couple this with the growing wealth of Gen Xers and the furniture industry has the demographic profile for growth in the future.