Americans Are Grumpy About Prices. Why Are They Still Spending?

Ryan Knutson (0:05)

Americans are really unhappy about the economy. But just how unhappy?

Well, there's actually data on that. Because economists like to measure everything, even feelings.

Jeanne Whalen (0:19)

They put out a survey where they go out and they ask questions by a bunch of people.

Ryan Knutson (0:26)

That's our colleague Jeanne Whalen. She's talking about something called the Consumer Sentiment Index, which is put together every month by the University of Michigan.

Jeanne Whalen (0:35)

They're pretty simple questions. Do you feel better off or worse off financially than you were a year ago? And then looking ahead, do you think that a year from now, you'll be better off or worse off financially? Just kind of broad questions like that.

Ryan Knutson (0:50)

According to this survey, consumer sentiment reached its lowest point ever earlier this year. And it's barely budged since.

Jeanne Whalen (0:58)

So, the index results in September were pretty low. The index landed at 48.1. And it's been falling generally throughout this year. So things are trending downward.

Ryan Knutson (1:13)

Economists pay close attention to consumer sentiment because it usually predicts how much people are willing to spend. When people feel good about the economy, they typically spend more.

And when they're feeling pessimistic, they tend to tighten their belts. But Jeanne says that right now, there's something strange going on in the data, something economists have rarely seen before.

Jeanne Whalen (1:35)

Consumers are angry. They are feeling really bad, but they're still going out and spending a lot. Since the pandemic, these two things have really decoupled a lot. The sentiment keeps going down.

Ryan Knutson (1:49)

So when you see these things decoupling, how consumers feel about the economy and what they're actually spending, what questions does that raise?

Jeanne Whalen (1:57)

Clearly, something has changed in the minds of the American consumer. And that's something that economists are trying to figure out what exactly has changed.

Ryan Knutson (2:09)

Welcome to The Journal, our show about money, business, and power. I'm Ryan Knutson. It's Thursday, October 15th.

Coming up on the show, Americans are worried about the economy.

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Ryan Knutson (3:14)

The reasons people are upset about the economy are pretty well understood. Everything is expensive, from housing to college to insurance to gas prices. And inflation picked up again in September.

And yet, people are still spending.

Jeanne Whalen (3:30)

So, of course, consumer spending is rising because prices are higher. We all know that. We're all paying more for things. But leaving inflation aside, we're also increasing the volume of stuff we're buying. We are also buying more stuff. So, consumer spending is rising both because prices are higher and because we're still buying more stuff.

Ryan Knutson (3:50)

To better understand why, our colleague Jeanne Whalen made a kind of sentiment survey of her own by going outside and talking to people in her neighborhood.

Jeanne Whalen (4:00)

I live on the north side of Chicago, somewhat near one of the main shopping corridors called Clark Street in Andersonville.

It's a place where young professionals live, young families, people who do have disposable income. It was a rainy Thursday afternoon, maybe around three o'clock in the afternoon. But there were people out buying stuff, and I went to a number of stores and restaurants to ask why, what prompted them to be there.

Ryan Knutson (4:33)

One of the shoppers Jeanne spoke to is Alice Wittar, who's 65 years old.

Jeanne Whalen (4:38)

So you're looking for a sofa?

Alice Wittar (4:39)

I'm looking for a sofa. I'm also looking for a coffee table and two side chairs.

Jeanne Whalen (4:44)

I found Alice at a nice furniture shop called District, and she was there after having lunch with a friend, and she was looking for a whole new living room basically to replace her aging furniture at home.

Alice Wittar (4:58)

I've lived with my old stuff for a long time, and it's time for a refresh. Also, my sofa really is threadbare.

Jeanne Whalen (5:04)

I asked her a bit about what her budget was, and she said, I don't really have a budget. It's kind of whatever it's worth to me.

Alice Wittar (5:12)