Since the early days of the pandemic, consumers have been the ones keeping the economy afloat. Despite the triple threat of record inflation, rising interest rates and concerns about the health of the economy, we’ve just kept buying stuff.
Recently, there have been some signs that all that spending is starting to flatten out. And later this week, we’ll get a look at whether that trend is continuing with consumer spending data and the personal consumption expenditure Index out on Friday. So what do consumers want to spend their money on these days?
Americans are pretty much set on stuff. We’ve been stocking up on clothing, electronics and big-ticket items for our homes.
“Obviously, there’s just oh so many air fryers I can, you know, have on my countertop,” said Stephen Rogers, a managing director with Deloitte.
Folks are trying to rebuild their savings cushions, he said. But we’re still talking about the American consumer.
“Alright, I’m gonna be a responsible adult and put some money away. But I’m also gonna go out and have some fun and travel,” he said.
After all, there’s still pent-up demand for services, like airfare and hotel stays, Rogers added. And for folks who can’t afford vacations, luxurious or otherwise, he said that people at almost every income level are finding ways to spend on fun.
Sofia Baig, an economist at Morning Consult, sees this too. “There continues to be surprising strength in spending in our recreation category,” she said.
Consumers are being more price-conscious about necessities at, say, the grocery store, so that we can afford to go out, she said. “Maybe the way that we can treat ourselves is by going to the local baseball game or you know, going to a movie.”
So, when might inflation, higher borrowing costs and fears of a recession really start to take a bite out of this kind of spending? Andrew Csicsila, managing director with AlixPartners, is also wondering.
“I feel like everyone has said for the last six to nine months, wait, something’s gonna happen, something’s gonna happen,” he said.
So far, people are still taking out their wallets and Csicsila expects we’ll still be calling consumer spending “resilient” with Friday’s data drop. But come June and July, he expects even our spending on services to dip.
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