WASHINGTON—It’s a trend that has surprised many: Why, despite being squeezed by high prices, have Americans kept spending at retail stores and restaurants at a robust pace? One key reason is a relatively simple one: Wealthier consumers, boosted by strong gains in income, home equity and stock market wealth,...
WASHINGTON—It’s a trend that has surprised many: Why, despite being squeezed by high prices, have Americans kept spending at retail stores and restaurants at a robust pace?
The disparities help explain the gap between gloomy consumer sentiment and widespread evidence of a healthy US economy—a major dynamic in the presidential race that is now in its final weeks. Only a portion of the American population is fueling most of the growth that is evident in government economic data.
“It speaks to the ongoing strength of those Americans, which is still carrying overall spending,” said Michael Pearce, deputy chief US economist at Oxford Economics. “Middle- and high-income households have been fueling the strong demand for retail goods,” Fed economist Sinem Hacioglu Hoke and two colleagues wrote.
As a result, for the lowest-income one-fifth of Americans—those earning less than $28,000—the share of their spending on discretionary items fell 2.5 percentage points by the second quarter of this year compared with 2019. It also declined for the second-lowest one-fifth of households and for the middle fifth. But for the wealthiest one-fifth, the share of their spending on discretionary purchases actually increased.
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