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Are Americans splurging more? I doubt it.

The Wall Street Journal says American consumers are spending lots of money on big blowouts:

Household spending, the primary driver of the nation’s economic growth, remains robust. Americans spent 5.8% more in August than a year earlier, well outstripping less than 4% inflation.

....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.

I'd like to fact check this, but how? The Journal provides zero evidence that "once-in-a-lifetime" spending has increased, and overall consumer spending is perfectly normal right now:

But maybe these aren't normal times?

“Normally at a time when you have higher inflation, but also higher interest rates, you don’t expect spending to hold up so well,” says Wilbert van der Klaauw, an economic research adviser on household and public policy at the Fed.

The thing is, that's not true:

Consumer spending, even adjusted for inflation, never declines outside of recessions—and only occasionally during recessions. Over the past 30 years it's happened exactly twice: first during during the Great Recession and then, briefly, at the start of the pandemic.

So I dunno. Are Americans increasingly splurging on big blowouts they can't afford? Maybe. But is there any actual evidence for this?

3 thoughts on “Are Americans splurging more? I doubt it.

  1. skeptonomist

    What van der Klaauw says should be expected is not meant to apply to the real world, only to the imaginary world of economists.

    Never expect economist's expectations to be correct.

  2. aldoushickman

    Wouldn't you *expect* consumer spending to slightly outstrip inflation? A 5.8% increase in spending over 4% inflation is about 1.8% in real terms, which is consistent with an expanding economy.

    I mean, isn't that the point? The economy grows so we can all enjoy consuming a bit more/higher quality [food/movies/electronics/clothes/vacations/pick-your-poison]. Sounds like something the WSJ would celebrate, instead of moralize about.

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