Is The US Entering A Millennial Baby Boom?

The COVID-19 pandemic ushered in some demographic shifts in the U.S., and one of the major changes was a surge in younger Americans moving out of downtown apartments and buying homes in the suburbs and other rural areas.

On Tuesday, Bank of America analyst Robert Ohmes said one of the fallouts from the surge in Millennial home buying is the potential for a subsequent baby boom.

The Numbers: U.S. live births were up 3.3% year-over-year in June and up 2.6% on a two-year basis. That month marked the first positive monthly growth in births since 2017.

“This and other data points, including elevated pregnancy test sales and Consumer Survey data pointing to improving new baby expectations, support our view that Millennials entering household formation years could drive a baby boom,” Ohmes wrote in a note.

From 2016 to 2019, pregnancy test sales averaged roughly 2% growth. Since June 2020, pregnancy test sales have averaged 13% year-over-year growth Ohmes said.

How To Play It: Millennials surpassed Baby Boomers in numbers for the first time in 2019. There are roughly 72.1 million Millennial Americans, suggesting a Millennial baby boom could certainly be an economic catalyst. Millennials represent 37% of homebuyers so far in 2021, according to the National Association of Realtors. More than half of Millennials aged 31 to 40 are repeat buyers, many of which are moving to larger homes to start families.

For investors, Ohmes said a Millennial baby boom would likely be good news for discount retailers, such as Walmart Inc WMT, Target Corporation TGT and Costco Wholesale Corporation COST.

Benzinga’s Take: As more Millennials start and grow families, their growing spending power may start to shift away from consumer discretionary buying toward more consumer staples. More babies means tighter budgets and less free time, so Millennial spending on travel, entertainment and leisure activities may drop in coming years.