Post-Pandemic Consumer Spending Trends

As we move through 2023, the resurgence of live experiences is unmistakable. Consumer spending on ballpark attendance soared, theaters flourished, and live performances brought music back into people’s lives. This summer witnessed Americans satisfying their post-pandemic cravings for experiences with unwavering enthusiasm.

Keith Gentili, a 55-year-old resident of New Hampshire, exemplified this spirit as he attended 13 shows this summer – a number that surpassed his annual pre-pandemic attendance. “It was like a buffet. The buffet was open,” he described the abundance of events.

Consumer spending remained robust this year despite challenges like inflation and rising interest rates. However, after a summer of exuberance, economists and consumer analysts are cautiously eyeing the upcoming holiday season. The resilience shown throughout the year might face significant pressure during this critical period.

Despite these concerns, holiday spending is expected to persist, albeit with a slight shift towards more experiential choices compared to previous years. The reasons behind this phenomenon are multifaceted.

Ted Rossman, senior industry analyst at Bankrate, observes this unique trend: people continue to spend aggressively on experiences like travel, dining, concerts, and sporting events, even amidst economic uncertainties. This behavior defies the conventional wisdom that consumers become more conservative during economically challenging times. Rossman believes that pent-up demand from the pandemic plays a significant role as people adopt a “you only live once” attitude.

While consumers are unlikely to pull back entirely, holiday spending may adopt a different shape. Early surveys suggest that spending during the holidays may not only surpass last year’s figures but also exceed pre-pandemic levels. KPMG’s 2023 holiday survey reveals that respondents plan to spend 5% more this season, with a notable emphasis on discretionary categories such as restaurants, apparel, and travel.

Matt Kramer, KPMG’s consumer and retail national sector leader, points out that people are leaning into holiday travel and creating memorable experiences with friends and family.

As the economic landscape grows uncertain, consumers are expected to become more deal-conscious and price-sensitive while maintaining their spending habits. The most recent Consumer Pulse research indicates that while 79% of consumers are making budget-conscious choices, higher-income and younger individuals are inclined to indulge in experiences like travel, fitness, entertainment, and self-care.

The Commerce Department’s latest retail sales report from September reinforces this trend, showing continued growth in consumer spending. Retail sales rose by 0.7% from August, marking the sixth consecutive month of growth.

However, the story is not entirely captured by monthly retail sales reports. A more comprehensive view of consumer spending will emerge when Personal Consumption Expenditures data is released.

Despite the expectation of a slowdown in consumer spending, a complete downturn is not anticipated. Gus Faucher, senior vice president and chief economist at the PNC Financial Services Group, remains optimistic about the economy, emphasizing that solid job growth and low consumer debt burdens are positive indicators.

Still, economic recovery has been uneven, favoring wealthier households, creating a K-shaped post-Covid recovery. Lower-income Americans face more significant challenges due to financial pressures, student loan payments resuming, rising debt, dwindling savings, high interest rates, and an uncertain geopolitical outlook.

As a growing list of complicating factors looms over the economy, some, particularly those with lower incomes and credit scores, might face financial pressure. Credit card delinquencies among individuals with lower credit scores have increased, indicating vulnerabilities in the system.

While consumers remain comfortable, economic fragility is a reminder that even the slightest change in circumstances can shift a comfortable situation into uncertain territory. As the economy navigates these challenges, it remains to be seen how the post-pandemic landscape will influence holiday spending and experiences.