The New Consumer
Whether it be facing 23-year high-interest rates or sizable inflation, consumers have stayed resilient in becoming the strong backbone of the U.S. economy. In August, American households spent 0.4% more month-over-month and 5.8% more compared to a year earlier. Even with signs showing a cooled labor market, the attractions of travel, concerts, and more have been too high for Americans not to resist. For the second quarter of the year, Delta Air Lines reported both record revenues and profits, depicting a summer travel period where pent-up demand didn’t let off. With the emergence of a variety of star-studded concerts, Ticketmaster sold nearly 300 million event tickets in the first half of 2023, up 18% when compared to the year before.
What is strange about the robust nature of the current consumer is that it doesn’t necessarily coincide with historical accounts. Generally, times of high inflation and interest rates means consumer pull back on spending, especially for big-ticket items. Recently, the percentage of households that claimed to have made one large purchase in the previous four months rose from 57% to 64%, the highest proportion in over eight years. However, now new challenges to face the American consumer’s wallets will be student loan repayments, labor strikes, and rising gas prices. A study by financial services firm Jeffries found that out of 600 consumers with student debt, 60% are “very concerned” about meeting all their expenses. Of the 600, 70% also plan to postpone any big-ticket purchases once payments become due. With payment bills ranging anywhere from $200 to $700 a month, the consumer may finally face enough challenges that can lead to a significant pullback on spending.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.