Zachary Halaschak is an economics reporter at the Washington Examiner. Before moving to Washington, he worked in Alaska, covering politics, government, and crime for the Ketchikan Daily News. While there, Zach won the Alaska Press Club’s second-place award for best reporting on crime or courts for his coverage of a local surgeon’s alleged murder. He graduated from the University of Richmond in 2017 and is originally from Marco Island, Florida.
People are still going out and spending money at high levels, a strange dynamic given the country’s inflation and rising interest rates, and it might take the labor market getting whacked for that to change.
Low consumer sentiment traditionally means people might be wary about spending more money. But the situation is complicated now because of the country’s inflationary plague. While headline prices are a more modest 3.7% higher today than a year ago, annual inflation rose a monstrous 8% in 2022 and 4.7% in 2021. When consumers compare prices now to what they were just three years ago, it’s difficult to say the economy is in good shape.
Rossman said the current situation with higher consumer spending comes down to two main drivers: pent-up demand and pandemic-related factors, plus the country’s strong labor market. Rossman said he thought that last year, the summer of 2022, was going to be the zenith of so-called revenge travel and that people might have gotten the pent-up demand for experiential spending out of their system by now.There was a notable uptick in travel this year, and blockbuster concert tours — like those of Taylor Swift, Elton John, and Beyonce — proliferated on social media, with fans shelling out sometimes thousands of dollars just to get their way into the jam-packed stadiums.
Delinquencies on credit card loans are also on the rise. They hit an all-time low during the pandemic in 2021 as consumers, flush with government stimulus payments, were staying in and spending less, but they have risen fairly dramatically since then. “I think that is the biggest predictor of whether or not people can pay their bills and how confident they are in making these bigger purchases,” Rossman said of the job market. And there might be more room for consumer spending to keep going given how strong the labor market is right now, he said.
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