The Consumer Sentiment vs. Consumer Spending Puzzle
Planet Money
Nov 21
The Consumer Sentiment vs. Consumer Spending Puzzle
The Consumer Sentiment vs. Consumer Spending Puzzle
Planet Money
Nov 21
Consumer sentiment and spending have long moved in tandem, but recent economic trends reveal a puzzling split. Even as people express growing pessimism about the economy, their wallets tell a different story—spending stays strong. This contradiction raises questions about what truly drives consumer behavior and whether current economic strength is as broad-based as it appears.
Despite widespread negative sentiment due to inflation, high interest rates, and uncertainty, consumer spending remains resilient—particularly among the wealthiest households. Data reveals that the top 20% of earners drive over half of all credit card spending, fueled by wage growth and rising asset values. This concentration means overall spending growth masks deep inequalities and creates a K-shaped recovery, where high-income groups thrive while lower-income households struggle with debt and instability. Reliance on a narrow segment of consumers makes the economy vulnerable to shocks, especially if stock or housing markets decline. Traditional sentiment surveys may not capture real behavior, particularly among the affluent, suggesting that economic health might be more fragile than headline numbers imply.
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Credit card data covers about 80% of credit card balances in the U.S.
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The wealthiest 20% were responsible for over half of credit card spending.
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In a K-shaped economy, those at the top are doing better while those at the bottom are falling behind.
