Americans keep buying a lot of stuff, even though said stuff is getting more expensive. The spending helps keep the economy afloat amid rising inflation — but at a cost to households digging deeper into debt to stretch their paychecks.
What did the commentators say?
Americans “continue to spend” even though they are “feeling pessimistic about their finances as affordability pressures mount,” said NBC News. Retail sales were up in August, and holiday spending is “projected to hit record levels this year.” The seemingly good numbers flick at a gloomier reality, however. The rise in spending is largely “because people are paying more” for the stuff they routinely buy.
The trend is “particularly remarkable” given the overall “downbeat consumer sentiment,” said The Wall Street Journal. Those dark moods historically “correlated with lower consumer spending,” but that rule of thumb mostly broke since the pandemic. Now economists say bad feelings about the economy are “increasingly decoupled from spending and other economic indicators.” Americans are “spending their financial condition not their psyche,” said Mark Mathews, the chief economist at the National Retail Foundation, to the outlet.
Older consumers are driving the economy, said CNBC. The affordability crisis is for “younger people,” said economist Ed Yardeni to the outlet. Senior Americans have “accumulated an enormous amount of net worth” that has allowed them to keep spending.
What next?
It is not clear the spending can continue much longer. U.S. households are “borrowing more, saving less and watching their paychecks lose purchasing power,” said the Wealth Advisor. Consumer debt is now above $18 trillion, a total which will carry future consequences. Today’s borrowing has the potential to “constrain spending for years, particularly when balances carry high interest rates.”
High prices “haven’t put a dent in U.S. holiday spending,” said The Street. Consumers have already begun Christmas shopping, increasingly relying on “buy now, pay later” options to buy gifts and other seasonal items. September purchases of holiday items, said Bank of America in a statement, per the outlet, “ran well ahead of 2025.”