What is it about the wave of uninhibited consumption in

What is it about the wave of “uninhibited consumption in the US that is confusing economists

Shopping in the USA

Shopping in the USA

Photo: Getty Images / BBC News Brasil

Consumers in the US are spending at record levels. Economists look at the phenomenon with surprise and try to predict where it will end.

Faced with high interest rates, low savings and crippling inflation, Americans are consuming without restraint.

On Black Friday, instore sales increased 1.1% compared to last year; A record $9.8 billion (R$48.6 billion) was reached on the Internet alone.

On Cyber ​​Monday, consumers spent another $12.4 billion (R$61.5 billion), an impressive 9.6% increase compared to last year.

The two data reflect Americans' spending habits, which fueled the country's economic growth last year, accounting for nearly 70% of real GDP growth of 4.9% in the third quarter.

While some of the spending reflects the rising cost of basic necessities, Americans continue to purchase expensive items and spend heavily on experiences like travel.

This “YOLO” attitude toward money runs counter to consumer trends in previous economic crises.

Some economists have wondered about this phenomenon, especially as consumers' perceptions of the economy remain overwhelmingly pessimistic.

“If we had said 18 months ago that the Federal Reserve could raise interest rates by 500 basis points and consumers would remain relatively calm, I would have been very surprised,” said Ellie Henderson, an economist at Investec Bank.

“I would have said, 'That's not how the economy works.'”

How can this phenomenon be explained? These are some of the keys to understanding consumerism in the US.

1. Save more

Typically, after a major crisis or recession in the labor market, the economy experiences a slight recovery in both consumer savings and spending.

However, the Reserve Bank of San Francisco reported in May that the postpandemic surge in government spending this year had exceeded the growth that followed any recession since the 1970s.

Experts point out that much of this growth is due to an “unprecedented” increase in American families’ savings due to the U.S. government’s rapid fiscal response to the pandemic.

The U.S. government's response to the pandemic has increased U.S. household savings.

Photo: Getty Images / BBC News Brasil

Stimulus packages that directly pumped $5 trillion into the U.S. economy combined with other indirect measures that included eviction moratoriums or suspension of student loan repayments resulted in Americans earning around 2.3% in 2020 and 2021 billion US dollars (11.4 billion R$) saved.

Although people have withdrawn some of their savings this year, many still have money in reserve some for the first time in their lives and are ready to spend it now, even if they don't believe in a full economic recovery.

This ongoing period of “you only live once” spending amid rising debt and dwindling savings has puzzled many economists.

2. New priorities

According to the Boston Consulting Group, the younger and upper middle class segments of the North American population lead the way in this type of spending.

Although these people are not necessarily wealthy, they earn enough to meet their needs and can spend money on vacations and luxury goods.

Many are also leaning towards buy now, pay later platforms, which are seeing huge growth in the US, as was the case during the Black Friday shopping spree in November.

“The strength of consumer spending, even after the dark days of the pandemic, surprised me,” said Wendy Edelberg, senior fellow in economic studies at Brookings and director of the Hamilton Project.

Although this pattern does not follow the country's economic precedents, some experts argue that it may be intuitive behavior.

Many Americans would rather spend their money on experiences than on savings.

Photo: Getty Images / BBC News Brasil

“If you don't really know what the future holds — or even if the future is long enough for you — focus on the present and the shortterm horizon,” says Chiraag Mittal, associate professor of marketing at the School of Marketing in Commerce McIntire from the University of Virginia.

And he adds that as behavior changes in work and life, “people are choosing to prioritize their happiness and fun.”

Malcolm Harris, author of “Palo Alto: A History of California, Capitalism, and the World,” a book about Silicon Valley without a translation into Portuguese, says that these kinds of intangible factors appear in qualitative analyzes that try to explain macroeconomic trends , is often ignored.

“Working life can change qualitatively without being well captured by key figures,” he says.

Although many people continue to work and receive wages, they are not necessarily happy: for example, wages are not keeping up with inflation and people are still recovering from the physical and psychological trauma of the pandemic.

“While job satisfaction numbers look solid, life happiness indicators are at a low point,” explains Harris.

“Given that so much of our lives are tied to work, how can analysts close the loop?” he asks.

3. The perception of temporality

As inexplicable as the phenomenon may seem, many economists agree that these YOLO spending patterns cannot continue forever and that the economic landscape will soon change.

Henderson warns of significant headwinds that could impact this situation, such as the impact of early learning grants that expired last October and the return of student loan payments.

“How is this not going to have an impact on consumption in the future?” says the economist.

Many Americans realize that these high levels of spending cannot last forever

Photo: Getty Images / BBC News Brasil

Additionally, U.S. credit card debt has surpassed $1 billion for the first time, and economists say the cost of staples is unlikely to fall any time soon, even if inflation remains under control.

Henderson predicts it will only be a matter of time before some Americans are forced to tighten their belts and limit waste.

But after such an extraordinary fiscal year, Edelberg isn't so sure.

“I really don’t know when that will change,” she says.

If he had to take a risk, Edelberg said the change in behavior would occur by the end of the year. Still, she says, “I honestly wouldn't be surprised if I was surprised.”

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