Why Corporate Execs Can’t Seem To Agree On Consumer Spending Trends

On the surface, it seems to be a tale of two economies. Why Corporate Execs Can’t Seem To Agree On Consumer Spending Trends Giphy

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There’s a host of economic data showing that many Americans are facing tough times. Debt is rising, late payments are becoming more common, and consumer prices remain stubbornly high.

But there’s one statistic that doesn’t seem to provide such clarity.

Pulling back or not?

Corporate earnings season is in full swing, and the results thus far have provided quite a mixed bag of results. Some companies — McDonald’s, Starbucks, and Home Depot, among others — provided fuel for the common assumption that consumers are pulling back on their spending as the formerly red-hot economy cools.

Then there are others — like Delta Air Lines, for example — that have posted some surprisingly robust earnings numbers, seemingly in defiance of the prevailing economic sentiment.

In the end, this dichotomy of corporate earnings reflects the reality that consumer spending isn’t a black-and-white issue. Americans are still spending money, but they’re being more deliberate about where that cash is going.

McDonald’s CEO Chris Kempczinski was candid about this fact during recent remarks, noting that consumers are “even more discriminating with every dollar that they spend” in light of the current situation.

“People get a daily reminder”

Even though some companies seem to be defying the economic cooldown, the cold facts paint a rather stark image.

  • The latest consumer price index shows inflation at an annual rate of 3.4%
  • Interest rates are at historic highs with no sign of immediate relief in sight
  • Average credit card debt has topped $6,200 for an 8.5% annual increase

All of these factors and more reveal why consumers are becoming more selective in their spending habits.

“Regardless of whether inflation is slowing amongst those goods, even with lower inflation, prices remain very high, and people get a daily reminder of that,” concluded economics professor Brett House.

Chris Agee
Chris Agee May 21st, 2024
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