All aspects of large economies are supposed to be interconnected. If consumers are feeling cautious, then consumer spending is supposed to drop. For the collectibles industry this may show up directly in some areas and may show up indirectly in others.
While collectors may have their eyes on certain trophies at any given time, there are two key issues released by the Federal Reserve Bank of New York which need to be given some consideration.
The first consideration is that household spending growth has now risen back above pre-pandemic levels. That is good news on the surface, but there is another issue that total household debt rose by $1 trillion to $15.58 trillion in 2021. Consumers are now carrying higher balances on their home loans and auto loans. The $1.02 trillion gain in 2021 was the largest single yearly gain since the $1.06 trillion gain back in 2007, which was right before the global financial crisis.
The New York Fed showed that median year-over-year monthly household spending rose to 5.1% in December 2021, up from 4.7% in August. While the data does not go back to pre-crisis levels, that jump in spending was the highest jump since the Fed began releasing the data in December 2014.
Make no mistake — the Federal Reserve does not look at collectibles. Collectors Dashboard does, and the significant rise in spending and the significant rise in household debt might easily be used as an interpretation that big-ticket items could become more selectively put on hold or pushed out.
Households which reported making a large purchase over the past four months fell to 58% in December from 63% in August. The forecast shows that the median expected growth in monthly overall spending over the coming 12 months rose to 4.6% (December) from 4.2% (August). That was the highest value since the start of the series in August 2015. Another boost was seen in everyday essential spending, rising from 5.2% in August to 5.4% in December.
Where things get tricky is in what to expect in nonessential spending. That expectation fell to 2.5% in December from 2.6% in August. The Fed’s conclusion:
While households expect a bigger increase in overall spending over the next twelve months, the average reported likelihood of making a large purchase over the next four months decreased in December with respect to vacations, home repairs, home appliances, furniture, and vehicles.
Some of the rising debt only makes sense if you have been following any of the news in the last year. Still, $15.58 trillion is no light matter. By now you have at least read about higher home prices and the cost of automobiles rising handily in 2021. Mortgage balances have reached $10.93 trillion auto loan balances have reached $1.46 trillion. The New York Fed further noted that new extensions of installment credit were at historically high volumes in 2021 for both mortgages and auto loans.
The current data show that overall consumer expectations for continued government support remain higher. Will that hold true with the Federal Reserve expected to raise interest rates and simultaneously end its balance sheet expansion? There is no way to know, but the New York Federal Reserve said:
The latest SCE Public Policy Survey, which tracks consumers’ outlook on a wide range of public policies, shows some moderation in expectations regarding year-ahead changes in welfare and unemployment benefits, with the average likelihood of further expansions falling to 32 percent and 31 percent in August from 39 percent and 53 percent in April, respectively. Despite the decline, expectations of continued program expansion or benefit-level increases remain considerably higher than pre-COVID-19 levels.
It is hard to benchmark the impact of consumer spending and consumer expectations within each sector of collectibles. That is even more the case when considering that some collectibles purchases would be competing for the same capital that would have otherwise just been invested into stocks and bonds. The state of collectibles so far looks strong based on auctions we are tracking in art, luxury, sports collectibles, wine and whisky, watches and in coins.
