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United States The Almighty Buck

Americans Are Still Spending Like There's No Tomorrow (wsj.com) 249

Consumers should be spending less by now. Interest rates are up. Inflation remains high. Pandemic savings have shrunk. And the labor market is cooling. Yet household spending, the primary driver of the nation's economic growth, remains robust remains robust. From a report: Americans spent 5.8% more in August than a year earlier, well outstripping less than 4% inflation. And the experience economy boomed this summer, with Delta Air Lines reporting record revenue in the second quarter and Ticketmaster selling over 295 million event tickets in the first six months of 2023, up nearly 18% year-over-year. Economists and financial advisers say consumers putting short-term needs and goals above long-term ones is normal. Still, this moment is different, they say.

A tough housing market has more consumers writing off something they'd historically save for, while the pandemic showed the instability of any long-term plans related to health, work or day-to-day life. So, they are spending on once-in-a-lifetime experiences because they worry they may not be able to do them later. "It's not a regret-filled, spur-of-the-moment decision," says Michael Liersch, who oversees a team of advisers as head of advice at Wells Fargo. "It's the opposite of that, where I would regret not having done it." Liersch cautions that it's too soon to say whether the spate of spending is a fleeting moment or a new normal. And consumers remain frustrated about inflation as the price of many goods remains significantly higher than a few years ago.

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Americans Are Still Spending Like There's No Tomorrow

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  • carpe diem (Score:2, Insightful)

    by Anonymous Coward
    World's on fire, yo.

    And half the passengers keep pouring on the gas.
  • by rsilvergun ( 571051 ) on Monday October 02, 2023 @01:36PM (#63894391)
    and they're working 60-70 hours a week while living with their folks or 6+ roommates.

    You saw that in Japan back in the 90s. "Lost Decade" they called it. Nobody could start families or get on with their lives. But they could afford cheap Chinese electronics and movie tickets.

    Fun fact: Japan's economy is in a permanent recession. It's almost like abandoning the next generation for short term gains and quips about avocado toast doesn't pay long term dividends.
    • by garyisabusyguy ( 732330 ) on Monday October 02, 2023 @01:53PM (#63894463)

      Japanese household savings are controlled by the woman of the house, and they traditionally save money at a 10% rate, which has resulted in decades of economic stagnation because the current economic model that insures constant growth involves households spending moire than 95% of their income, as we do in America

      The entire American economy is hinged on consumer spending, it is time that we recognized out power and use self-limited spending to force the rest of our society to cater to our needs

      A consumer can dream

      • I don't know about you, but even in the days when my income was minimum wage like rsilvergun's, I still managed to stash away no less than 15% of my gross income every month. I always had plenty set aside for a rainy day as well.

        You don't need to tell the masses to save money. Either they just do it, or they don't. I tell people to do this all the time, and hardly any of them ever do, but that's mainly because they don't want to live within their means. I've personally always lived well below my means. I th

    • and they're working 60-70 hours a week while living with their folks or 6+ roommates.

      ...and their budget is still tied up on rent, groceries, a car payment and gas.

      The people doing all this spending aren't the ones who are stuck on the paycheck-to-paycheck treadmill. It's the folks who are driving around in Teslas and actually buying the houses starting in the low $400s who have the income levels driving all this spending. Believe me, the rest of us are just looking at the price of everything and thinking "WTF are people doing to get the kind of salary you'd need to afford that?"

  • what do you expect (Score:5, Insightful)

    by Osgeld ( 1900440 ) on Monday October 02, 2023 @01:39PM (#63894405)

    We are dumb, and when the party is over it will be $political party or $President 's fault and not personal responsibility

    but at least you saw Taylor Swift before the bank forecloses on your mansion and takes your 100,000$ SUV

    • Re: (Score:2, Informative)

      by Powercntrl ( 458442 )

      but at least you saw Taylor Swift before the bank forecloses on your mansion and takes your 100,000$ SUV

      If the cost of a concert ticket is all that stands between you and the repo man, you're in rather precarious financial shape to begin with.

      Most of the increased demand for live entertainment is still due to shows that were canceled due to Covid. It's all money people would've spent anyway over a longer period of time, had the virus not done its thing.

      • These aren't normally priced concert tickets.

      • by nightflameauto ( 6607976 ) on Monday October 02, 2023 @03:36PM (#63894831)

        but at least you saw Taylor Swift before the bank forecloses on your mansion and takes your 100,000$ SUV

        If the cost of a concert ticket is all that stands between you and the repo man, you're in rather precarious financial shape to begin with.

        Most of the increased demand for live entertainment is still due to shows that were canceled due to Covid. It's all money people would've spent anyway over a longer period of time, had the virus not done its thing.

        Have you seen the price of tickets lately? The last couple concerts I perused when the tickets went on sale would have covered a few house payments. And I was looking at the damned cheap seats.

      • but at least you saw Taylor Swift before the bank forecloses on your mansion and takes your 100,000$ SUV

        If the cost of a concert ticket is all that stands between you and the repo man, you're in rather precarious financial shape to begin with.

        It's all a matter of perspective. I don't think that a lot of people were taught to play the long game. And that's a problem, because unless a person gets lucky, the long game is the key to success.

        I started life in poverty, defined my goals, got my first job, then picked out a place that would provide what I wanted, (University environment) and worked hard to get work there. Got it, then got married and started college on the college discount benefit. Took advantage of every savings setup, had three ret

  • by johngen86 ( 8411289 ) on Monday October 02, 2023 @01:39PM (#63894413)

    Inflation ended over a year ago. The most recent read was an annual rate of 3.2%, but even that is overstating the actual rate, as CPI lags housing significantly.

    Note that the fact that prices are still significantly higher than 2020 does not mean there is still inflation. Inflation is the rate of change, and it is now completely normal.

    Prices are not going to go back down to 2020 levels, and indeed, it would be a disaster if they did, and we don't want them to do that.

    • This. While inflation was 3.67% on Aug 31, 2023 (latest numbers), it was 8.26% on Aug 31, 2022, and while it's higher than pre-2020, it's not "high". The Fed's goal is 2%.

      Google: current US inflation rate [google.com]

    • by jbengt ( 874751 )

      Inflation ended over a year ago. The most recent read was an annual rate of 3.2%, but even that is overstating the actual rate, as CPI lags housing significantly.

      That's the year-to-year inflation for July 2022 to July 2023. The year-to-year number for August is the latest, and it was 3.7%. Those numbers lag the annualized month-to-month inflation rate which, last I checked, is less than 3%. Inflation peaked near the middle of 2022, so the year-to-year number includes months with higher inflation than we

    • it would be a disaster if they did, and we don't want them to do that.

      There are billions of people suffering under high cost of living, but in a world filled with every calamity it's surprisingly hard to find many suffering from the disaster of falling prices.

    • Tomorrow certainly is not guaranteed. But if you do survive, one thing that *is* guaranteed, is trouble coming your way. Your car will break down, you will need medical attention, you will have to replace things and make repairs. Whatever it is, some financial problem is guaranteed to come (assuming you do survive).

      Those who understand this inevitability and plan for it, will be in much better shape than others, when the inevitable does happen.

      If your car has no shock absorbers, then every bump in the road

      • Oh I don't disagree, and I do have a cushion (several) to see me through hard times, and further I agree that not many understand your point, mostly younger people.

        I guess I was making the point that there are people, perhaps a whole generation who are living in despair and see no hope of having a long and happy life. So they're throwing away their money on last minute gratification.

        • Very true. Young people do tend to despair and rage against older generations. They see older generations as not having had to go through the same hardships they are facing, even if the reverse is actually true. They see "old boy" networks that were in fact the result of years of developing healthy relationships with people. They tend to have lower income than older people, because their careers are just beginning. So it's not surprising that young people would be in despair now.

          On the other hand, the savin

  • housing is a big one (Score:4, Interesting)

    by crgrace ( 220738 ) on Monday October 02, 2023 @01:41PM (#63894419)

    The giving up on buying a house is a big one, I think. I happen to live in San Francisco and make quite a nice salary but buying a house here makes no sense (even though I could afford it if I were willing to be house poor).

    Right now it costs more than 2X to buy a house than to rent a similar property (largely because interest rates are up sharply, but prices are only down slightly).

    So, I've come to accept I will never own a house and that's OK. So, that means I can spend more money (or invest it) in other areas.

    I'm sure I'm not alone.

  • by Bobknobber ( 10314401 ) on Monday October 02, 2023 @01:48PM (#63894445)

    Jokes aside, the economy has not finished fully processing the Covid stimulus money. On top of the fact that Americans effectively saved up a couple years worth of vacation money sitting in quarantine that they are now just starting to spend.
    If manufacturing backlogs are any indication this is likely a temporary bump that will not meaningfully register on the trend lines for consumer spending.

    Though there is a small, SMALL chance that Americans believe this may be their final chance to travel the world before it goes to the dumpster. WW3 would put a damper on my holiday plans for sure.

    • by rogoshen1 ( 2922505 ) on Monday October 02, 2023 @01:57PM (#63894473)

      >On top of the fact that Americans effectively saved up a couple years worth of vacation money sitting in quarantine that they are now just starting to spend.

      big doubt on that, i'd wager a good chunk of american's are putting gas and groceries on credit cards right now. all the pandemic and retarded stimmy payments did was line the pockets of doordash, amazon and bestbuy, and maybe cabelas. people spent their stimulus money as soon as they got it. And then some.

      there's a few 'canaries' (so to speak)
      >makeup/fashion products
      >powerball/lottery jackpots.
      >credit card balances

      i'd wager we're looking at an incoming tsunami of bankruptcies in the very, very near future.

  • by HBI ( 10338492 ) on Monday October 02, 2023 @01:53PM (#63894461)

    The Fed is trying to bleed everyone's savings dry to keep inflation low so that they can restart the slow process of reducing interest rates. The smart will resist depleting their savings, most won't.

    The whole consumer economy is based on a near-zero savings rate [stlouisfed.org] and active consumption. Take a look what happened when COVID set in and it all makes sense.

    • The Fed is trying to bleed everyone's savings dry to keep inflation low so that they can restart the slow process of reducing interest rates. The smart will resist depleting their savings, most won't.

      The whole consumer economy is based on a near-zero savings rate [stlouisfed.org] and active consumption. Take a look what happened when COVID set in and it all makes sense.

      Yep. You're basically rewarded for living on credit, and punished for saving money now.

      • You seem to have a funny definition of "reward" and "punishment."

        Higher interest rates literally reward savers and punish borrowers.

        • FYI, if the savings interest rate is below the inflation rate, then you are not saving a dime by putting your money into a savings account

          • This is true.

            And it's also true that higher interest rates reward savers and punish borrowers.

            • Higher interest rates also punishes business development as the cost of money is higher and it can result in consolidation as vulnerable business fail and get bought up by companies that have access to capital without seeking loans

            • by sfcat ( 872532 )
              No, they reward those that hold assets whose prices track with or do better than inflation. Things like businesses and business equity, buildings and houses. They punish savers unless they "save" in an investment that also does as well as or better than inflation. So it depends on how you define saving and just putting it in a saving account probably isn't going to be rewarded. "Saving" by buying a house probably is, even with high interest rates which can be refinanced in the future. But in the stat f
        • by HBI ( 10338492 )

          Higher interest rates are generally in lockstep with real inflation, so there is no gain really. Just treading water, hopefully. And not even that the last couple of years, the savings rates tend to come up much slower than the discount rate or for that matter, loan rates. If you had significant savings, inflation eroded its value before higher interest rates became available.

          Which is another policy win for the Fed. They are basically compelling you to invest in either government instruments like bonds

          • Higher interest rates are generally in lockstep with real inflation

            Historically, interest rates have been higher than the rate of inflation, except for 2001-2002, and after 2008. So I don't think it's fair to say that there's "no gain."

            https://www.gzeromedia.com/the... [gzeromedia.com]

            Even if there is "no" gain, a healthy savings interest rate does encourage people to save, if for no other reason than to keep from losing their money over time.

    • This makes no sense. It was *low* interest rates (which were held too low for far too long) that discouraged people from saving, because there was no return on investment. The COVID "free" money handouts, which the Fed had nothing to do with, is actually what triggered inflation, because people had money to burn and bought everything they could think of, driving up prices.

      The Fed certainly behaved foolishly in the way it set interest rates, but it's way too simplistic to blame them for the economic situatio

      • by HBI ( 10338492 )

        Explain the early 2000s then.

        The Fed has actively discouraged savings for a very long time. It's an unstated policy goal. If everything is financed, that gives the central bank a great deal of control over economic activity. It makes their levers and by extension their job (minimize inflation, moderate interest rates and minimize unemployment, statutorily) easier, and also maximizes economic activity, because your actual access to assets does not impede consumption.

        I don't actually blame them, but preten

        • It's an unstated policy goal

          You have no evidence for this, this is only an unsupported statement of your opinion.

          I'm not sure what about the early 2000s you are asking for an explanation regarding. If it's specifically about discouraging savings, then yes, low interest rates do discourage savings and encourage borrowing. In your initial post, you seemed to be stating that today's *higher* interest rates were an attempt by the Fed to bleed everyone's savings dry, when the opposite is true, higher interest rates encourage savings, not d

          • by PPH ( 736903 )

            when the opposite is true, higher interest rates encourage savings

            If you have access to investment instruments that track interest rates going up. Most people don't, or don't know how to shop for such products or how to manage a portfolio of them.

      • by DarkOx ( 621550 )

        It was free money handed out and supply crunch due to other covid policies at the same time that caused.

        The big factor though was who go the money. You can't give the poor and lower middle classes money without causing inflation precisely because they spend it!

        You can give it to the relatively wealth but than its not an effective stimulus because they don't spend it.

        The right policy is actually to keep hiking rates. The higher the rates the more the modest incremental saver wins, the more the loss the rec

        • >or finding out the airline industry isn't worth having etc

          There really shouldn't be an airline industry between destinations that could be effectively served by rail. Especially places where you have long straight runs where climate doesn't interfere. Scrap the planes and go with high speed rail. Oh noes, it takes a day to cross a continent instead of a few hours. So what? We should be telecommuting for the time sensitive stuff anyway.

  • And I want a nice looking apartment. Fuck all you haters telling me otherwise.
  • It's quite obvious why.

    People realize we are only a very short distance away, and probably only a very short time away, from one or more of the following:

    * Hyperinflation. (Not inevitable, but the easiest way out for any debtor nation, never mind the most indebted nation in the history of the world.)

    * Economic collapse, which to a degree is unavoidable due to grossly excessive governmental, corporate, and consumer debt, as well as the impending end of the dollar's Bretton-Wood

    • Hyperinflation is when monthly inflation is more that 50%. The desired yearly inflation rate is 2% because that drives growth.

      The US inflation is pretty good and no way near hyperinflation in August at 3.7%, which a bit higher that in June when it was just 3.0%, but that is much better than June 2022 when it was 9.1%. For an international comparison of current inflation see: https://tradingeconomics.com/c... [tradingeconomics.com] Many countries have a higher rate than the US.

      When one looks at national debt, it is the debt
  • by wakeboarder ( 2695839 ) on Monday October 02, 2023 @02:18PM (#63894551)
    Consumers are just following the example of the country and politicians, having a spend now tomorrow we die attitude. It's going to suck when it catches up to us.
  • When your currency is being rapidly devalued, incentive to save it is reduced.
  • Inflation on food, energy, and housing is far outpacing gains in income. Below a certain threshold, that goes higher all the time, you have no choice but to spend everything you make just to live. We keep shifting all of the income and assets to the top 1% and then wonder why we are all broke. Thank Reaganomics. How is that trickle-down working out? It has been a trickle-up for 40 years and now everyone is broke.

  • Americans are probably still physically spending at the same levels as they always were.

    The only difference is prices are so much higher now.

    If they were buying X amount of widgets for $10k last year, but prices for widgets are 2x
    times higher this year then, yes, they're spending record amounts . . . . .but it's for the same
    amount of widgets.

    There are some things you can cut back on but, when the basics and everyday staples are
    that much higher, you don't really have a whole lot of choice. It's not like you

  • After the pandemic, people have discovered their own mortality, and have decided to spend more while they can than saving to spend when they're old and feeble. I might die of COVID or some other terrible disease soon, might as well buy that stupid lamp shade I don't need.

    The other thing is, consumerism has been weaponized by platforms like Temu, where they literally have created a Casino interface to Alibaba. I have met several people who are addicted to buying cheap shit on Temu, because you gain points an

  • Economics says the smart move is to load up on long term fixed-rate debt for assets that maintain their value or appreciate in value if you project high inflation for the long-term future.

    The logic behind it is you'll be paying off the debt with dollars that are worth less than when you spent them. The risks of this approach are that appreciation and wage inflation adjustments will not outpace your interest cost or you'll be unable to service the debt.

  • In the US the latest official figures are about 3.5%. It is higher than desirable, but hardly high. In most EU countries it is below 7% - in some, it is as low as, or lower than, that in the US. Again, higher than desirable, but not high. Inflation is high in the likes of Argentina, Turkey., Pakistan or Egypt - not in the US and most of the other developed countries.

Don't panic.

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