{"id":383186,"date":"2026-04-16T22:24:10","date_gmt":"2026-04-16T22:24:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/383186\/"},"modified":"2026-04-16T22:24:10","modified_gmt":"2026-04-16T22:24:10","slug":"how-are-consumers-still-spending-so-much","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/383186\/","title":{"rendered":"How Are Consumers Still Spending So Much?"},"content":{"rendered":"

A reader asks:<\/p>\n

What is consumer debt doing? All this bad news and people are still spending like drunken sailors?! Where is the canary in the coalmine?<\/p>\n

Fair question.<\/p>\n

This entire decade people have wondered how the consumer remains so resilient in the face of higher inflation, gas price spikes (twice now), tariffs, a slowing labor market and constant worries about the possibilities of a recession.<\/p>\n

And yet\u2026<\/p>\n

Just look at retail sales continuing to move higher:<\/p>\n

\"\"<\/p>\n

The Transcript<\/a> shared some comments from recent earnings calls where the executives all agree the consumer remains in good shape, spending-wise:<\/p>\n

\"\"<\/p>\n

Airline traffic also remains strong:<\/p>\n

\"\"<\/p>\n

Households are still going on vacation. Restaurants are full. People are buying stuff.<\/p>\n

How?<\/p>\n

Why have all of the predictions about a consumer slowdown this decade been wrong up to this point?1<\/p>\n

There are a few reasons.<\/p>\n

Debt has increased in the 2020s for sure:<\/p>\n

\"\"<\/p>\n

Consumer debt is much higher than the pre-pandemic days, increasing from $14.2 trillion at the end of 2019 to $18.8 trillion by the end of 2025.2<\/p>\n

But you have to look at the debt in relation to the assets to avoid denominator blindness.<\/p>\n

\"\"<\/p>\n

The assets dwarf the liabilities and it\u2019s not even close. Plus, the growth of those assets has far outpaced the growth in debt by roughly two-to-one in the past six-plus years.<\/p>\n

Although it always feels like the rich just keep getting richer, the bottom 90% has actually experienced larger relative gains in wealth in the 2020s:<\/p>\n

\"\"<\/p>\n

This is surprising, right?<\/p>\n

Of course, the top 10%<\/a> still control far more wealth than the bottom 90%. But collectively, everyone has gotten richer.<\/p>\n

It\u2019s hard to overstate how much wealth has been created in the stock and housing markets in the 2020s.<\/p>\n

Home equity has nearly doubled since the end of 2019:<\/p>\n

\"\"<\/p>\n

There is also nearly $8 trillion in money market assets:<\/p>\n

\"\"<\/p>\n

The 2020s have experienced an explosion of wealth.<\/p>\n

If you want to know why consumers have been spending like drunken sailors despite everything that\u2019s happened over the past 6 years and change, this is the simplest explanation.<\/p>\n

Inflation stings but wages are higher too and assets are way higher.<\/p>\n

That\u2019s not to say things are perfect. They never are. The rising tide has lifted most but not all ships.<\/p>\n

Delinquencies are rising in credit cards, student loans and auto loans:<\/p>\n

\"\"<\/p>\n

\u00a0<\/p>\n

This is worth paying attention to.<\/p>\n

The good news is that the number of households with foreclosures and bankruptcies remains low by historical standards:<\/p>\n

\"\"<\/p>\n

Can this continue?<\/p>\n

Americans love to spend. We\u2019re good at it.<\/p>\n

I guess a lot depends on how financial markets perform and whether the unemployment rate rises meaningfully.<\/p>\n

As long as households feel wealthy and have a job, it\u2019s hard to see spending levels slow.<\/p>\n

If the markets take a prolonged dive and\/or people start losing jobs, this situation could certainly change.<\/p>\n

I covered this question on the most recent episode of Ask the Compound:<\/p>\n

\ufeff<\/p>\n

We also touched on questions about why markets move so much in the short-run, how well your 60\/40 portfolio protects against bear markets, how advisors should think about private investments and some lessons learned in wealth management.<\/p>\n

Further Reading:
The Longest Economic Boom Ever?<\/a><\/p>\n

1Remember when the big concern was excess pandemic savings running out? You don\u2019t hear about that anymore.<\/p>\n

2Mortgage debt still makes up the biggest liability by far (70% of the total). Auto loans (9%), student loans (9%) and credit card debt (7%) are the other big categories.<\/p>\n

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