Retail spending is being powered by savings that Americans have left over from the pandemic and it’s not going to last forever, a new report shows.
Spending will rise 0.4% on a monthly basis during the holidays, according to an economic outlook from Caden, a data platform that pays 50,000 users to track their real-time spending. While that’s lower than recent months, it shows that consumption is still on the rise.
Higher outlays are predominantly being fueled by personal savings instead of debt, Caden’s findings show. The trend “is a response to the economic reality that people’s incomes are struggling to keep pace with the escalating costs of goods and services due to inflation,” according to a summary of the study’s findings from the company. Leftover balances from the economic stimulus packages of the pandemic have encouraged consumers, according to John Roa, Caden’s chief executive officer.
The problem is that this trend won’t last.
“The question is when the party runs out and those savings run out, where is it going?” Roa said. “We are seeing a paycheck-to-paycheck world. It’s not going to take long for that to dwindle.”
While recent data have shown that Americans’ level of indebtedness is climbing, Caden sees credit-card spending moderating as consumers use other means to pay for purchases. Following December, it’s unclear how Americans will propel their spending habits, he said.