Skip to content
All about finance. — business — Personal-finance — Finance

Consumers feel disagreement between their feelings and spending habits

Economic outlook has frequently been pessimistic, as indicated by consumer attitudes, but conventional measures, such as employment rates, spending levels, and economic expansion, have generally been more encouraging.

,   and  Administrator
3 min read
Economic outlook appears consistently pessimistic among consumers, contrary to steady data...
Economic outlook appears consistently pessimistic among consumers, contrary to steady data indicating job growth, increased spending, and robust economic advancement.

Consumers feel disagreement between their feelings and spending habits

The "vibecession" persists, as recent reports suggest. This term indicates a gap between public opinion (also known as soft data) and actual economic data (hard data). For instance, our latest survey reveals that over half of U.S. adults planning to spend less on travel, dining, or entertainment in 20Y.Z. Yet, the numbers show a different story.

While the general mood is down, it's crucial to observe actions, not just words. Spending at bars and eateries rose 7.8% year-on-year in April, and 6.8% in March, according to the Census Bureau.

Travel appears to outpace last year's pace, with the Transportation Security Administration screening an average of 2,375,000 passengers daily this year, slightly above 20Y's pace through June 2. Given that last year marked a record number of air travelers, this suggests that air travel is holding up quite well despite gloomy airline earnings calls.

Live Nation reported record concert ticket sales in Q1 of 20Y.Z., signaling strong demand throughout the summer.

Ted Rossman, our senior industry analyst, is an expert on the credit card industry. He helps consumers make the most of rewards, pay off debt, and improve their credit scores.

So, what's causing this vibecession?

The University of Michigan's Index of Consumer Sentiment, published since the 1970s, shows consumer sentiment has remained depressed ever since the COVID-19 pandemic began in 2020. Inflation appears to be the primary culprit, as high prices have left many feeling They aren't making progress despite low unemployment rates and strong wage growth.

Our latest Wage to Inflation Index, released in September 20Y.Z., reveals prices increased an average of 20% from 2021 to mid-20Y.Z., while wages only grew by 17%. Although the inflation rate has since decreased, the cumulative effect remains significant. Many Americans hope prices will return to pre-pandemic levels, often forgetting that slowing inflation means prices are still increasing, just at a slower pace.

In some categories, prices have even fallen, such as travel. Airline fares have dropped 8%, according to the latest Consumer Price Index. Car and truck rental prices, as well as hotel and motel costs, have also decreased by 2%. Gasoline prices have tumbled an impressive 12%. This might explain why people perceive they're spending less on travel.

It's essential to remember that local experiences don't always mirror macro trends. Economic inequality persists, with the top income bracket accounting for half of U.S. consumer spending, as per Moody's Analytics.

One theory suggests that consumer sentiment may no longer be as reliable an indicator as it once was. People are expressing pessimistic views but still engaging in spending, particularly on experiences, due to the YOLO attitude fueled by the pandemic. This phenomenon is sometimes referred to as revenge or doom spending.

A survey found that 39% of Gen Zers and 37% of millennials are willing to accumulate debt for travel, dining, or entertainment in 20Y.Z., compared to 31% of Gen Xers and 21% of baby boomers. This is concerning given the average credit card rate stands at a near-record 20.12%.

Despite numerous uncertainties, one thing is clear: People aren't feeling great about the economy. Nevertheless, consumer spending, which fuels about two-thirds of economic activity, remains high in discretionary categories like dining and live entertainment. This seemingly paradoxical situation may be due to high-earners propping up the average, continued job market stability, and the post-pandemic YOLO trend where young adults spend on experiences, even if it means incurring debt or postponing traditional milestones like marriage, homeownership, or parenthood.

While it's never appropriate to dismiss history by saying "this time is different," it seems that a shift has occurred, especially among Gen Z and millennials. These generations increasingly prioritize spending on experiences over traditional markers of adulthood.

  1. It seems that the vibecession might be caused by a discrepancy between consumer sentiment and actual spending, with many Americans feeling pessimistic about their personal-finance situation despite evidence of increased spending in certain areas such as travel, dining, and entertainment.
  2. In the realm of business and finance, the vibecession could also be attributed to the YOLO (You Only Live Once) attitude among Gen Z and millennials, who are willing to accumulate debt for travel, dining, or entertainment, despite high-interest rates, suggesting a shift in priorities towards experiences over traditional markers of adulthood.

Read also:

    Related

    Latest