Despite high inflation, rising interest rates, and consistent recession predictions from Wall Street, Americans have continued spending at near a record pace over the past year, opting to splurge on Disney vacations and DoorDash deliveries.
Rising wages and a “cash buffer” of savings that was built up during the pandemic—when spending slowed and benefits like stimulus checks and enhanced unemployment boosted incomes—have provided consumers with “unprecedented spending power,” according to Liz Young, head of investment strategy at SoFi, an online bank. But data shows many Americans have begun financing their new spending habits with credit cards and draining their savings in recent months, as the cost of living soars. Some experts fear that means a spending slowdown—or even a recession—could be on the horizon.
