A cohort of increasingly cautious consumers is growing. Thana Prasongsin/Getty Images
- US consumers are reacting differently to the uncertain economic outlook.
- While some engage in “doom spending” – spending money mindlessly – others look for ways to save.
- The economy needs these “doomsday saviors,” even if they could cause headaches for some companies.
There is a lot to worry about.
In response to uncertainty, some people resort to “doomscrolling,” or mindlessly scrolling through a limitless social media feed.
If the antidote to doomscrolling is putting down the phone, then the opposite of doom spending might well be putting down the credit card in favor of doom saving. Many consumers do exactly that.
Data from retailers and the U.S. government suggests a cohort of increasingly cautious consumers is growing, even as many continue to spend “like drunken sailors,” in the words of JPMorgan CEO Jamie Dimon.
And while the Intuit report, which coined the neologism “Doom Spending,” found that a worrying 22% of Americans have no savings at all. Millennials and Generation Z who responded to the survey, in particular, report wasting their money (or promising to pay for it later) on things that make them feel a little better, at least for now.
Still, about half of Americans have at least $2,000 in the bank.
Admittedly, that’s not great, but there are several signs that some households are becoming more careful with their money.
First of all, US economic data released on Thursday showed a slight increase in personal savings, which have been declining in recent months. The rate is still very low and it will take a few more months before a real trend emerges.
Meanwhile, retailers including Walmart and Target said in November that consumer spending continued to decline amid pressure from high interest rates, persistent inflation and other factors such as the resumption of student loan repayments in October.
“This year, we’ve seen more consumers delay spending until the last moment,” said Target CEO Brian Cornell. “Guests who previously purchased sweatshirts or jeans in August or September are choosing to wait until the weather turns cold to purchase.”
Walmart CEO Doug McMillon even suggested that the recovery in supply and weakening consumer demand could lead to price cuts in the grocery store.
Both retailers, as well as several others, also noted that shoppers are looking to spend even more of their money and are becoming increasingly picky about the deals they’re willing to spend money on.
Of course, discounts and offers aren’t savings – they’re still expenses – but the doom saving mindset is about responding to uncertainty by trying to conserve a limited resource.
During last week’s Black Friday, shoppers responded strongly to retailers’ steep discounts.
According to a recent study by Morning Consult, most consumers are fed up with high prices Opinion pollbut more than a third of respondents said they would be okay with a recession if it caused inflation to fall.
Interestingly, while these more cautious consumers could slow sales growth for some companies, the economy as a whole could seriously use a dose of their austerity.
In other words, “doom spending,” like its older siblings “revenge spending” and “stimulus spending,” is a key driver of ongoing inflation that has yet to be successfully contained.
Spending less and saving more – doom saving, so to speak – may not be as entertaining as hedonistic consumption, but it should help curb price increases that still pose a real risk to the economy.
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