Money Is Tight, but Americans Are Still Revenge Spending – Your Money Briefing

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J.R. Whalen: Here’s Your Money Briefing for Wednesday, April 3rd. I’m J.R. Whalen for the Wall Street Journal. It feels like consumers are losing the numbers game. Grocery prices are still high, the savings they built up during the pandemic is almost gone, and it’s gotten more expensive to carry a balance on a credit card. And yet they still find money to splurge.

Jennifer Williams: They’re still spending on travel, they’re going out to eat, though that has come down slightly. They’re still buying clothing and they’re trading down a bit or moderating their purchases in the grocery store to offset those experiential purchases.

J.R. Whalen: We’ll talk to Wall Street Journal reporter Jennifer Williams about never-ending revenge spending after the break. High prices in an unsettled economy haven’t deterred Americans from revenge spending on everything from travel to concerts. Wall Street Journal reporter Jennifer Williams joins me. Jennifer, what is revenge spending?

Jennifer Williams: So the idea is that coming out of the pandemic consumers had a pent-up desire to be out and to travel and to go out to eat. They had saved money during the pandemic, so the concept of revenge spending is this idea that with money to spend and the desire to be out, you’re doing those things versus grocery shopping, buying the essentials.

J.R. Whalen: Household grocery bills are still high, and many people have actually spent down savings they built up during the pandemic. What are they spending on?

Jennifer Williams: They’re still spending on travel, they’re going out to eat, though that has come down slightly in the US. They’re still buying clothing from what I’m hearing from CFOs. And they’re trading down a bit or moderating their purchases in the grocery store to offset those experiential purchases.

J.R. Whalen: And yeah, Jennifer people are actually spending a lot of money on these experiential purchases.

Jennifer Williams: Yes, so last summer there was the so-called summer of Taylor Swift where people were spending exorbitant amounts of money on concert tickets to see her and Beyoncé and others, and economists are wondering if that will continue into this summer. And for some of them, they think that consumers will do that again.

J.R. Whalen: We saw retail sales rise 6/10ths of a percent in February, but that wasn’t as strong as economists were expecting. Does that mean that Americans are actually starting to pull back?

Jennifer Williams: They’re starting to pull back around the edges, but they’re still looking for ways to treat themselves, it’s just not all the time. And the thinking is that as we got used to the idea of spending on experiences, consumers are trying to keep that up, whether that’s using credit or continuing to spend down their savings even more. There’s still this sense that you could lose the ability to have an experience like we did during the pandemic, so they’re still spending on those things.

J.R. Whalen: The way that consumers have continued to spend has surprised economists, but what does it mean to the companies that actually sell the products?

Jennifer Williams: It’s been a good thing. For some retailers they’re finding that consumers are still willing to invest on a nice article of clothing, for instance, or to travel, so they’re investing dollars to make sure that a garment is nice or that a hotel is available for a big event like the solar eclipse, for instance. For others, like Conagra’s CFO talked to me about what they call selective splurging, where shoppers are finding ways to offset spending on experiences and being out by making adjustments in the grocery store. So they are increasing their marketing spend to try to get consumers to shop their products again.

J.R. Whalen: Why is that important to companies to not be surprised by consumer spending habits?

Jennifer Williams: The CFOs that I spoke with have started to say that they are anticipating that the consumer will eventually pull back some on their discretionary spending, but they’re not budgeting for that, and they’re not forecasting for that this year. The importance of not having the surprise is that they can do exactly that, plan out the financials for the year, and it’s better to be safe and assume that this will continue when you’re planning for the fiscal year.

J.R. Whalen: And then eventually that could wind up showing up in the prices that people pay for the products on the shelf, right?

Jennifer Williams: Restaurants and retailers have taken a lot of pricing over the last couple of years, and consumers haven’t really balked at that. CFOs are starting to see some price sensitivity, and this notion that consumers may have hit their limit in terms of how much higher prices can go. So this tension, I feel like where companies are trying to figure out, “Well, if people are pulling back or buying less and we can’t raise prices anymore, what do we do to help the bottom line?”

J.R. Whalen: How have the current spending levels impacted other areas of people’s finances?

Jennifer Williams: Some have written off the possibility of buying a new home with where mortgage rates are. Some are no longer thinking about saving for retirement, embracing this, have an experience now and spend on that, versus some of these more longer term, safer, rainy day type of savings.

J.R. Whalen: Companies typically spend a lot of money researching consumer habits. What do they tell you about that versus what’s going on now in the marketplace and how consumers are spending?

Jennifer Williams: There’s a lot of looking for what the new normal will be. They are seeing patterns that historically they wouldn’t have expected to see. Economists too have been surprised by the strength of the consumer, so it means that they’re looking for where things will normalize and what the new normal might be.

J.R. Whalen: That’s WSJ reporter Jennifer Williams, and that’s it for Your Money Briefing. We’ll be back tomorrow morning with WSJ’s Callum Borchers to discuss how some people who felt they were indispensable at work weren’t indispensable at all. This episode was produced by Ariana Aspuru with supervising producer Melony Roy. I’m J.R. Whalen for the Wall Street Journal. Thanks for listening.

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