As with the past few years, recent data shows that “Baibe Session” remains in effect. The term refers to the gap between consumer sentiment (sometimes called “soft data”) and “hard data” (e.g., consumer spending, employment reporting, economic growth).
Bankrate’s recent Discretionary Expense Survey We’ve captured numbers that match the trend. My mood is declining. 54% of US adults expect to spend less on travel, food and live entertainment than this year in 2024. But it’s important to see what people do, not just what they say. And what they’re doing – well, those numbers aren’t added to what they’re saying.
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What causes this atmosphere?
Consumer sentiment has been declining since the Covid-19 pandemic began in 2020, according to the popularity of the University of Michigan Indicators of consumer sentiment It has been published for nearly 50 years. It reached an all-time low when inflation peaked in June 2022, recovering only to retest this spring due to tariff fears.
inflation
High prices are the problem, at least from an emotional perspective. Despite the extremely low unemployment rates throughout 2022 and 2023 (and still quite low today), wage growth has surpassed inflation for the past few years, but Americans feel they can’t even keep up with all the price increases in 2021 and 2022. By the end of June 2024, wages had an average increase of 17%. Pain is a cumulative effect. Inflation rates aren’t too bad now, but they’re built on top of important price increases that workers haven’t fully overcome.
Although inflation continues to decline this year, cumulative effects remain important. Many consumers hope that costs will return to where they were 2019 before the pandemic and associated supply chain disruptions that have driven the surge in inflation that endured in 2021 and 2022. Of course, prices are still increasing and are growing slowly as inflation is declining. Lower prices are generally disliked as a sign of an economy burning by economists. The main purpose of Federal Reserve System It’s about promoting stable prices (which are generally understood to mean an inflation rate of around 2%) and maximum employment.
In some individual categories, especially in the travel sector, prices have actually declined over the past year. According to the latest, airline fares have dropped by 8% Consumer Price Index. Car and truck rental prices have dropped by 2%, as well as hotel and motel costs. Gasoline has dropped by 12%. This may promote the perception that people spend less on travel.
All news is local
It is also important to note that individual experiences do not always reflect macro trends. Economic inequality continues to grow and sadly many households are struggling. The top 10% of earners drive 50% of US consumer spending. According to Moody’s analysis. This helps explain why the economy and consumer spending can grow, even with many cuts.
Young Adults are yologging
Another theory is that consumer sentiment is less predictive than before. People are saying one thing and doing something else because of the attitude that “you are only alive once” (yoro) has intensified during the pandemic. There are other trendy names that experts have applied to this trend.Revenge spending” and “Fateful expenditure. ”
Some Americans, especially young adults, pay attention to the wind, travel, go to restaurants, music festivals, and sporting events, and feel uneasy about their finances. Sometimes it’s even a conscious act of rebellion, and although these people in their 20s and 30s say the outlook that they can afford to buy their homes, pay off student debts and childcare is rather bleak, but at least they can enjoy it.
For example, most Coachella participants Buy now to fund tickets and pay later plans. Bankrates found that 39% of Gen Zers and 37% of millennials are willing to take on debt this year for travel, meals or live entertainment, compared to 31% of Gen Xers and 21% of baby boomers. That’s sometimes worrying Average credit card rate This is a record close to 20.12%.
Climbing to the wall of worry
There is a lot of uncertainty about the economy right now, but one thing is clear. It is led to concerns about inflation addressed over the past few years and the possibility of tariffs getting worse. But they are still spending anyway, and consumer spending is spending about two-thirds of economic activity.
The strange part is that when people get nervous about the economy, the first thing they tend to cut back on is extras like travel and food (at least traditionally). Of course, there is a huge difference in spending more because you have to (because housing, groceries, and healthcare are becoming more expensive) and because you want it, there is a big difference.
Conclusion
For now, at least in total, people are spending more on almost everything. Discretionary categories such as dining and live entertainment are growing faster than most. Some of this is certainly because higher earners support the overall number. Furthermore, the job market remains strong, allowing people to spend. However, don’t underestimate the post-pandemic “world” trends. It seems there is still room for running. Many Americans spend their time climbing the walls of worry and enjoying experiences that will make you feel better.
It’s always dangerous to say “this time is different,” but fundamental changes are taking place, with Zers and millennials in particular prioritizing spending on experiences, even if it means delaying traditional milestones such as marriage, homeownership and having children.
