| Despite past trends, US consumers are spending at record levels. Economists are mystified – and struggling to forecast an endpoint.
Throughout sky-high interest rates, depleted savings, and grinding inflation, Americans have spent with abandon. On Black Friday, sales at brick-and-mortar stores were up 1.1% from last year; online alone, US shoppers spent a record $9.8bn online alone. Consumers spent another $12.4bn on Cyber Monday – an eye-popping 9.6% increase over last year. This holiday splurge follows a pattern of US consumer spending, which has buoyed the American economy in the past year, making up nearly 70% of the real GDP’s 4.9% Q3 growth. While some of this spending reflects the rising cost of necessities, Americans are also still buying big-ticket items and laying out tons of cash for experiences. This “YOLO” attitude towards money bucks the spending trends of past economic downturns – and some economists have been left scratching their heads, especially as consumer sentiment on the economy remains overwhelmingly pessimistic. “If 18 months ago, you’d have said the Federal Reserve Bank could raise interest rates by 500 basis points, and the consumer would chug on, relatively unfazed, I would have been extremely surprised,” says Ellie Henderson, an economist at UK-based, global bank Investec. “I’d have said, ‘that’s just not how economics works’.”
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