American Consumers Are Both Saving & Splurging Amid Inflation
Washington, DC, January 24, 2023-"Americans are cutting back on many everyday purchases amid inflation, while splurging on a few big-ticket items,” reports the Wall Street Journal.
“Welcome to the split-brain budget.
“After more than a year of high inflation, consumers are exhausted from the dozens of budgeting micro-decisions they must make in a given day, economists say. Retail sales fell 1.1% in December, according to the U.S. Commerce Department, as consumers wrestled with rising interest rates and other concerns about their financial futures.
“And yet, some with at least a little wiggle room in their budgets are deciding to splurge on trips, experiences and designer products while drastically cutting back elsewhere. In a January Morning Consult poll of 2,200 American adults conducted for The Wall Street Journal, three in 10 said they have purchased a luxury good in the past month. More than a third of that group spent over $100 on the purchase.
“A slowdown in economic growth and still-high inflation are fueling these types of spending decisions that feel good, even if they’re not especially budget-friendly, says Michael Liersch, head of advice and planning at Wells Fargo.
“It’s a phenomenon similar to staying up late to reclaim hours in the day lost to work and chores, behavior known as revenge bedtime procrastination. Call it revenge inflation spending.
“A year-and-a-half ago, Dr. Liersch says, people could practically buy groceries on autopilot. Many habitually bought the foods and brands they liked, and could basically predict every month what they would need and how much it would cost.
“Prices for some purchases, like gas, have dropped in recent months. But grocery prices remain high. People still have to make constant trade-offs as they go down the supermarket aisle, Dr. Liersch says.”