A drop in consumer spending is freaking out corporate execs

The Future. As high inflation persists, many consumers are more aggressively managing their budgets, prioritizing their spending on needs rather than big-ticket or recreational purchases. Because a struggling consumer usually indicates a struggling economy, this trend could not only foreshadow an amplified divide between “the haves and have-nots” but also a possible recession.

Trying to make a dollar out of 15 cents
NYT reports an increase in the number of times that CEOs and CFOs have cited “low-income consumers” as the reason for declining sales on their earnings calls this quarter. So, what’s going on with consumer spending?

• On one end of the spectrum, people are using up their pandemic savings, accumulating credit card debt, and relying on “buy now, pay later” plans to make monthly ends meet.
• On the other end, they have little-to-no debt of any kind and have accumulated nice sums from their stock-market-tied retirement accounts to fund vacations and expensive nights out.

Stretched too thin
While mainstream brands like McDonald’s, Starbucks, and KFC are seeing the average consumer pull back, less price-sensitive industries like travel and hospitality are still seeing people book flight, hotel, and restaurant reservations.

In other words… people with tighter belts will spend less amid economic uncertainty, and people with extra cash will always spend money — no matter what the economy looks like.