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Increased prices are making people angry — but they’re still breaking spending records



So why are consumers just so grumpy?

It’s turned into a trendy topic these days, a question that is popping up everywhere as economists judge what’s next for 2024. And it’s one that possibly could influence retail sales in the holiday shopping season.

Maybe. Or maybe not.

For a while now, consumers have been saying one thing and, apparently, buying a great deal of what they want anyway. They’re not happy with higher prices or inflation, but consumer spending has been surprisingly more resilient than many economists had expected this year after a string of 11, dramatic rate hikes by the Federal Reserve to cool things down.

Cyber Monday spending breaks record

On Cyber Monday, for example, consumers spent $12.4 billion, up about 9.7% year over year, according to Adobe, which analyzes e-commerce transactions. During the peak time from 10 p.m. to 11 p.m. Monday, Adobe noted, consumers nationwide essentially spent $15.7 million every minute.

Cyber Monday spending broke the $11.3 billion record set last year.

What were they buying? Clothes, electronics, appliances, furniture, jewelry, sporting goods and toys. Hot Wheels, Lego toys, Mario Kart toys, Disney Pixar Cars toys, Disney Junior Minnie Mouse toys and playsets. And shoppers bought expensive game stations, such as the Xbox Series X, PlayStation 5, and Nintendo Switch and video games.

Price, of course, is top of mind this holiday season, as consumers continue to combat the aftermath of an inflationary spike in 2022. They’re looking for deep discounts — and value.

Record spending online across Cyber Week — $38 billion spent over the five days from Thanksgiving through Cyber Monday — was attributed to discounts, especially on quality products, that can drive impulse shopping, according to a statement from Vivek Pandya, lead analyst at Adobe Digital Insights.

From Nov. 1 through Nov. 27, consumers spent $109.3 billion online, according to Adobe’s data, up 7.3% year from a year ago. Adobe is forecasting that the full holiday season — running from Nov. 1 through Dec. 31 — will hit $221.8 billion, up 4.8% from last year.

Economic anxiety and discontent, no doubt, will be on the front lines of debate in a contentious presidential election campaign in 2024. But some pretty great gifts and impulse buys will be handed out for Hanukkah, which begins Dec. 7, and Christmas, too.

Consumers have reasons to spend

Tracking how consumers feel about the economy and their financial picture and outlook is one way to find an early clue for how well — or poorly — the U.S. economy could do in the year ahead.

Let’s face it, many consumers continue to have the means — and good reason — to spend.

The U.S. economy isn’t in a deep recession. Many economists, including the economists at the University of Michigan Research Seminar in Quantitative Economics, say a recession isn’t likely at this point in 2024.

The U.S. unemployment rate was 3.9% in October. UAW members at the Detroit Three just negotiated a contract with a serious pay raise and attractive bonuses after an unusual, 46-day Stand Up Strike that limited the walkouts to specific factories and reduced the overall economic carnage.

The U.S. economy has been growing. Real gross domestic product — an inflation-adjusted measure that reflects the value of all goods and services produced by an economy — surged to grow 4.9% at a seasonally adjusted annualized rate in the third quarter of 2023, up from 2.1% in the second quarter. The third-quarter gain was the fastest growth rate since late 2021.

But consumers aren’t doing backflips.

Still a nagging feeling about the economy

The Conference Board Consumer Confidence Index released on Tuesday bounced back in November, after three months of consecutive decline. But consumers continued to have low expectations at levels that traditionally have indicated a recession within the next 12 months. Even so, consumer sentiment regarding current family financial conditions suggested that consumer finances overall were healthy going into the holidays, according to the Conference Board, a nonpartisan think tank.

We’ve now seen a four month stretch of declining consumer sentiment, based on data from the University of Michigan Surveys of Consumers. Consumer sentiment fell in November by a modest 2.5 index points, down 4%.

The University of Michigan and the Conference Board both measure consumer confidence by asking a random sample of consumers five questions about current economic conditions and expected future conditions. Consumers also are asked about their personal financial situation.

Inflation is on everyone’s mind

University of Michigan Surveys of Consumers Director Joanne Hsu raised the question — “Why do consumers feel so down when the economy seems so strong?”— before economists and others gathered at the University of Michigan’s Research Seminar in Quantitative Economics on Nov. 16.

Hsu, the chief economist for the well-respected economic surveys, said consumers aren’t out of touch with reality. They’re aware of the good news on of the inflation front, as inflation has fallen substantially since hitting a peak in the summer of 2022.

Yet consumers remain frustrated by prices that remain much higher than pre-pandemic levels, Hsu said, and many blame higher prices for why they believe their personal finances are worse. Consumers had not expressed this much concern about the impact of higher prices on their finances in roughly 14 years.

Nearly 20% of consumers mention high gas prices or high food prices when expressing concerns about inflation.

Hsu noted that consumers’ views of their personal finances improved in November, thanks to falling gas prices and easing inflation. But their economic outlook has deteriorated, she said, due in part to growing concerns about high interest rates, ongoing wars in Gaza and Ukraine, and uncertainty relating to the upcoming 2024 election.

For 10 straight weeks, gas prices have continued falling nationwide, according to GasBuddy data through Nov. 26 when the average hit $3.21 a gallon.

Drivers in Michigan saw gas prices hit a new low for 2023 in late November when average prices hit $3.16 a gallon for regular unleaded on Monday, according to AAA. Gas prices were 20 cents a gallon less than the same time last month and 49 cents a gallon less than same time last year. And they’re down dramatically from the spike at $5.22 a gallon in Michigan as of June 11, 2022.

What’s perhaps worse is that consumers seem to have a feeling that while inflation has pulled back, lower prices — especially lower gas prices — won’t stick around for long.

“Consumers are not expecting the moderation in gas prices to continue,” Hsu said. “Uncertainty is really, really high.”

“Consumers are still really uncertain about what’s coming up ahead.”

Many, she said, are not confident that positive developments with inflation will continue.

“With considerable uncertainty amid wars in the Middle East and Ukraine, as well as a U.S. election less than a year from now, consumers are concerned about the various ways the economy could take a turn for the worse,” Hsu noted in a statement Nov. 22.

Return to pre-pandemic normal isn’t happening

Uncertainty is the name of the game — and could very well be one piece of the puzzle here.

Hsu and other economists I talked with raised the possibility that there’s something much deeper behind the angst nearly four years after the COVID-19 pandemic hit.

Hsu talks of a “collective anxiety and grief that we’re not going back to the pre-pandemic normal.”

The pandemic, she told me, might be over but many consumers are not generally returning to the same experiences or lifestyles that they remember from 2019.

Many lost relatives and friends who died during the pandemic. Some changed jobs or saw their jobs change dramatically. Many aren’t going into the office as much — if at all — so some may experience a more isolated feeling.

Others may be worried that their employers will be pressuring them to go back into the office more in 2024 — and they’re not sure how they’re going to handle picking up their children from school now.

“They don’t know what’s next — and we’re not returning back to what we thought was normal,” Hsu said.

A dichotomy exists between what most would dub a healthy economy and the low levels of consumer confidence in the future. If consumers aren’t confident, they typically will pull back on investing and spending.

One reason consumers are unhappy is that the cost of living has jumped significantly, outpacing wage growth for many, according to economist Sung Won Sohn, a professor of finance and economicsLoyola Marymount University in Los Angeles.

People see dramatically higher prices for cars, eggs, Big Macs, child care and more, even though the economy overall has been healthy.

Sohn noted that government data indicates that the overall consumer price index rose 20% between October 2019 to October 2023. During that same time period, food prices rose 25%, energy 33% and new cars 26%.

Take a look at the average price for large Grade A eggs, which spiked in early 2023 at $4.44 a dozen in the Midwest region, according data from the U.S. Bureau of Labor Statistics. Egg prices fell back to $2.07 a dozen on average in October. But they remain much higher than the average price of nearly $1.22 a dozen back in January 2020.

The average price of new cars escalated to nearly $48,000, up by more than $10,000 from a few years ago.

In October, according to Kelley Blue Book data, the average price paid for a new vehicle in the U.S. was $47,936. That’s down 1.4% year-over-year when the average transaction price last year was $48,606.

By contrast, Kelley Blue Book earlier reported the average transaction price for a vehicle in the United States was $37,352 in May 2019.

Nowhere , Sohn said, is the impact of inflation felt more acutely than in the housing market. The average cost of shelter, including rents, rose 20% during the same period.

Sohn noted that the economic strain disproportionately affects those at the lower end of the income spectrum — particularly those who face higher housing costs.

“Moreover,” he said, “it erodes the sense of economic security that is foundational to consumer confidence, leading to a cautious, if not outright pessimistic, outlook on the economy.”

Then, there’s that now viral paper receipt for a $16.10 fast food meal, with 91 cents in tax, posted by an angry McDonald’s customer in Post Falls, Idaho, a year ago. The Dec. 20, 2022, receipt hit TikTok, then resurfaced now and continues to enrage many. The bill for the late night meal covered a limited edition “smoky” double Quarter Pounder BLT with fries and a Sprite.

To be sure, we’re looking at an angry consumer who spent a good deal of money anyway. On fast food, not a necessity. Not all that long ago, many consumers simply refused to order or buy something when a price tag was outrageous. Some of us — including me — still walk away. I watched two price conscious shoppers in action at a Five Below discount store in Detroit, where many items were $5.55 or $5 or less. The women took some items to a register to ask the clerk to scan the items for the exact prices, and then they calmly left the register to shop a little more and figure out exactly what they really wanted to buy.

People are paying attention to prices.

Yet, now, we frequently see all sorts of outlandish prices slapped all over social media.

High prices are a political, social statement.

Part of the picture is that there are lot of angry people out there. They drive angry. They shop angry. They dine angry.

And, yes, some could have good reason to be upset after some troubling turns in their lives.

But maybe there is something else, too, behind all that unhappiness. Maybe it is that angst of not knowing what’s next. Or some are wondering why so much seems to have changed, but in many cases not really changed at all, since 2019.

Watching prices go up, up, up

Bill Adams, chief economist at Comerica Bank in Dallas, told me that consumer confidence used to be directly influenced mainly by the unemployment rate and the consumer price index. After a period of higher inflation, though, we’re dealing with the aftermath of higher prices even as inflation cooled down.

“People think about the level of prices, not the rate of change,” Adams said. “And the level of prices in grocery stores is shocking. The level of prices if you go out house shopping is shockingly high.”

It’s one thing to see increases in the consumer price index at 3.2% year-over-year in October — a much more reasonable level than the 9.1% spike in June 2022. But it’s another to spot the price of a pound of salted brand-name butter, not on sale, at $6.29 or $6.79 a pound when you remember buying butter on sale for $3 to $4 a pound.

Or watch a fast food meal that you remember might have been $5 at one point now ring up at $9 or $10 or more.

For some, including me, shopping can quickly turn into a stressful experience, far more so than even a few years ago. Trying to snag a sale the day before Thanksgiving, the clerk at an Ulta Beauty store spent a great deal of time asking for my email address and personal information, including dwelling on whether I ever lived in Montana. All the while, I’m thinking, “You know there’s a line behind me, don’t you?”

Snagging a sale often can seem tougher when now you must download a long list of apps offered by supermarkets, warehouse clubs, big box stores and other retailers and then be sure to click on the right deal at the right time. Digital-only offers can leave many consumers with limited access feeling shut out from the best prices.

Right now, Adams said, the very unaffordable housing market is weighing on consumer sentiment, too.

“High interest rates are holding back consumer spending on other categories, like durable goods, cars and trucks, appliances,” Adams said.

But another element, which he says economists don’t have great tools to measure, involves all the social disruption and dislocation that has happened since the pandemic began in 2020. We know it’s out there — and it’s possible that it’s influencing consumers far more than we might realize.

“You can see it in a lot of different surveys of social conditions that don’t show up in Americans’ savings accounts or the stock market,” Adams said.

Contact personal finance columnist Susan Tompor: Follow her on X (Twitter) @tompor.

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