Wealthy Americans are driving retail spending and supporting the U.S. economy by maintaining strong spending at stores and restaurants despite the impact of higher prices.
The latest data comes from a survey conducted by the Federal Reserve System.
The big picture: Wealthy consumers, supported by strong increases in income, home equity, and stock market wealth, are the primary drivers of retail spending, marking a shift from pre-pandemic times.
Conversely, low-income consumers struggle to afford expensive necessities like rent and groceries, limiting their discretionary spending ability. The disparity between wealthy and low-income consumers is contributing to the gap between gloomy consumer sentiment and the actual strength of the U.S. economy. The US Federal Reserve’s decision to keep interest rates high has had a limited impact on curbing consumer spending, which continues to grow at a significant pace.
Learn more: U.S. retail sales rose a solid 0.4% from August to September, with restaurant sales particularly notable, demonstrating consumer confidence in the strength of the economy.
Economic growth in the July-September period was estimated at a high 3.4%, further highlighting the influence that wealthy households have on overall economic performance. Increases in wealth in housing and stock market assets have particularly benefited high-income households, causing them to save less and spend more.
Flashback: Fed research reveals that inflation-adjusted spending on retail goods among high-income households has surged since 2018, while growth in spending among lower-income households has been more limited. Ta.
Shrinkage: Low-income earners face rising inflation on essential goods, limit spending on discretionary goods, and some struggle to maintain their previous purchasing power.
The proportion of borrowers who are delinquent on their credit card and auto loan payments is increasing, indicating that some low-income consumers are experiencing financial hardship.
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