Things are a little confusing in the economy right now. And it seems like consumers are a bit confused too.
Earlier this week we learned that retail sales are surprisingly strong and people are still spending money on cars, furniture and electronics. Meanwhile, polls still show people are concerned about inflation and the economy. A new study by PwC says that 96% of consumers intend to adopt cost-saving behaviors in the next six months.
In other words, there’s a disconnect between what people say and what they do. What gives?
When times get uncertain, people look for ways to shed some fat. Colin Jordan from Scottsdale, Arizona, recently left a blockchain startup to start his own marketing company. For him? The fat is his lunch, which happens to be a salad.
“Now, you know, I have to get up a little bit earlier, make some breakfast, make some lunch,” he said. “You know, this saves us a lot of money.”
Save with spending plans. His family will soon take a trip to Europe. It was originally for his grandma’s 80th birthday but was postponed due to COVID-19. She just turned 83.
“Who knows when we’ll be able to do that again? So I’ll be eating ramen for the next six months if I have to,” Jordan said.
We are still affected by the pandemic and it shows in how we spend money. We’ve lived through three years of economic madness, said Joanne Hsu, who directs the University of Michigan’s Surveys of Consumers.
“We have this time of the pandemic, inflation, all this uncertainty, political polarization,” she said.
How tiring because we’ve been fighting back for so long, and how confusing because we’re bracing for a recession while unemployment is at historically low levels. Therefore, there is a discrepancy between what we say and what we do, Hsu said.
“Because consumers aren’t just responding to one part of the economy,” she said. “They are responsive to their entire experience.”
Because of this, you might fall into this budgeting pattern while splurging.
“For example, if you stop eating at an upscale restaurant, suddenly you can spend more money on DoorDash,” said Ravi Dhar, who directs the Yale Center for Customer Insights.
This can result in savings, Dhar said — but also in more spending, like on a cup of coffee or a tube of lipstick. “And affordable luxury items, as they call them, can actually increase sales because of the stressful moments that people have in their lives,” he said.
Are you saving money by staying home on a Friday night and lighting that new lavender candle you bought to feel better? Just a hypothetical one. But hey, it makes sense to me.
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