Consumers are propping up the US economy, but they’re going into debt to do so

Americans’ consistent spending, despite high inflation and interest rates, has sustained the U.S. economy for the past two years. However, signs indicate that this trend may be coming to an end as households deplete savings and accumulate record credit card debt, potentially ending the post-COVID-19 spending surge. Wells Fargo’s Scott Wren believes that last year’s holiday spending was a consumer “last hurrah” as the economy slows.
Consumers also face “price tag fatigue” due to persistent inflation, remaining above the Federal Reserve’s 2% goal. Comparing prices to January 2021, food prices surged by 33.7%, shelter costs by 18.7%, and energy prices by 32.8%. Low-income Americans bear a disproportionate burden, as their already stretched paychecks are significantly impacted by price fluctuations.
In December, the average U.S. household had to allocate an additional $211 per month to afford the same goods and services compared to the previous year, a consequence of persistent high inflation.