Americans Sour on the Economy but Can't Stop Spending

Kyle Brooks is extremely disappointed with the policies of the Trump administration and is considering relocating to another country. Additionally, he is concerned that federal budget reductions may continue to negatively impact the upscale Washington, D.C., restaurant where he serves as a manager.

However, these worries have not led him to cut back. "I haven't actually downsized in any area," explained Brooks, who is 30 years old.

Americans are pessimistic about the economy following President Trump’s tenure. market-rattling first few months In office, but generally, they are spending more than ever, which is currently propelling the economy forward. For now.

In March, retail sales increased by 1.4% compared to the previous month, according to data released by the Commerce Department earlier this period. Car sales saw significant growth, but there was also an uptick in spending at dining establishments and apparel outlets. These statistics reflect consumer behavior prior to President Trump’s address on April 2nd. widespread tariffs , although the government subsequently halted some of those tariffs .

The data indicates that despite the tariff announcements, overall expenditure increased over time, albeit with shifts in purchasing behavior among consumers. The study revealed that airline expenditures dropped by over 13% for the week ending April 19th when contrasted with figures from the previous year. Conversely, sales of electronic goods purchased online saw a rise of 7.5%. Overall, aggregate card transactions processed through Bank of America witnessed a growth of 3.1%.

The affluent people Who have been driving economic activity recently continue to spend, supported by rising wages, according to Liz Everett Krisberg, who leads the Bank of America Institute. The expenditure by the wealthiest 5% of clients increased approximately 3%, indicating that significant drops in their investment portfolios haven't deterred them from buying goods and services.

The information is startling since the sentiment among both American consumers and enterprises has significantly worsened this year. Last Friday, the University of Michigan released findings indicating this trend. index of consumer sentiment plummeted significantly in April compared to the prior month.

Last month, The Conference Board, a prominent business research organization, announced that their comprehensive index of consumer confidence had significantly declined in March. They also noted that their metric for future outlook plummeted to its lowest point in twelve years.

The major query at hand is whether and when these emotions will cause consumers to rein in their spending. doesn’t always happen For instance, the Michigan Sentiment Index dropped significantly between mid-2021 and mid-2022 as inflation surged. Despite feeling pessimistic about the economy, Americans continued their spending habits.

"We're truly finding it difficult to comprehend this situation. The surveys indicate sentiment moving in one direction, but spending isn’t necessarily aligning with that," stated Everett Krisberg.

Walt Robertson, a 79-year-old retired manufacturing executive, hasn't noticed any economic slowdown in his South Carolina neighborhood. "I reside on Hilton Head Island," he explained, "and right now, it’s impossible to secure a spot for golf or even a table at a restaurant."

His buddies are also splashing out money. "Whether you grab a meal at any of our beloved restaurants, it typically costs a few hundred dollars, and nobody thinks anything of it," according to Robertson.

People’s views on the economy often hinge significantly on which party holds the presidency. Following Trump’s election in November, Democrats began feeling much more pessimistic about economic conditions, whereas Republicans became considerably more optimistic.

Robertson mentioned that his son is worried about the high costs following the latest period of inflation. However, Robertson himself is enthusiastic about the tariffs because they might lead to more manufacturing jobs being created within the nation.

Experts in economics believe that there is a significant possibility of an economic downturn approaching soon. Individuals who are currently increasing their expenditures to avoid potential price hikes due to tariffs may reduce their spending later on.

The Commerce Department reported that inflation-adjusted consumer spending increased just 0.1% in February, as per the most recent data.

Customers are teetering on an economic edge, and they desire reassurance," stated Mark Zandi, who serves as the chief economist for Moody’s. "However, it's more probable that rising costs and declining stock values will push them off.

Firms are preparing for more challenging periods ahead. Kimberly-Clark, known for producing Huggies diapers and Kleenex tissues, stated recently that consumers at all income brackets are seeking out bargains when purchasing necessities. Meanwhile, American Airlines reported a drop in domestic travel requests and has withdrawn its annual forecast.

And businesses spanning various sectors, including Hermes which produces Birkin bags, are intending to increase their prices. some prices Relying on customers to handle tariffs might cause many Americans, who have been grappling with increased prices over the past several years, to close their wallets.

Brooks, who manages a restaurant in Washington, is considering scaling back—sometime later. If his earnings decrease, he may purchase less wine and postpone taking further education classes.

Alicia Logan, a 52-year-old married Pennsylvania mom of three who works in marketing, watched her investment accounts fall over the past few weeks. She was already feeling afraid for the direction of the country after Trump’s attacks on the judiciary And disclosures that senior officials had conversed about confidential matters within a Signal chat.

She has reduced her family's buying activity on Amazon.com. However, they purchased a second-hand vehicle out of concern that waiting might lead to higher costs. In aggregate, their expenses likely remain similar to what they were previously, according to Logan.

We're fortunate to have secure employment," Logan stated. "Yet, for the very first time, I've experienced genuine fear.

Send your correspondence to Rachel Louise Ensign. Rachel.Ensign@wsj.com