Consumer spending has been holding steady despite economic worries

On Tuesday, we’ll learn more about how one of the main engines of the economy is doing when we get retail sales numbers from the Census Bureau. If the latest private data is any indication, consumer spending stayed strong in August.

The National Retail Federation released numbers on Friday showing that retail sales rose 0.5% month over month and 6.81% year over year, which is a good sign for this economy.

If you just look at how much people are spending on all sorts of things, you’d never guess how worried many of them are over tariffs, rising inflation, and a slowing job market.

“Consumer spending continues to surprise to the upside,” said Ted Rossman, senior analyst at Bankrate.

Over and over again, since the pandemic began and inflation spiked, economists have been expecting consumer spending to drop, and it just hasn’t.

“I continue to be curious about, ‘How long can this last?’” Rossman said.

Some of the increased spending people are doing is because they have to and because things cost more, but, he said, some is because they want to go out to eat or travel.

Charles Lieberman, a managing partner and Chief Investment Officer for Advisors Capital Management, said the important thing is that they’re buying something.

“Does it really matter if you spend money on a tape recorder versus a steak? You’re spending money,” he said.

The main reason consumers were able to keep spending money in 2021 and 2022 as prices rose is that they had a lot of savings from early in the pandemic, but that’s not the case anymore, per Mark Mathews, chief economist and executive director of research at the National Retail Federation.

“The thing that is keeping consumers going right now are wages,” he said. “Wages continue to exceed the rate of inflation.”

And as long as that’s true, consumer spending will likely stay strong, he added.