Skyrocketing inflation rates haven't discouraged consumers from spending their hard-earned money thanks to substantial cash stimulus provided by the government.
But the trend has failed to reverse despite record-high interest rates, as the Federal Reserve has held the benchmark federal funds rate in the range of 5.25% to 5.5%, the highest level in 22 years.
While the National Retail Federation (NRF) expects holiday sales in the U.S. to register a growth rate in the range of 3% to 4%, down from the 5.4% growth rate recorded last year, retail sales in the last two months of the year are expected to smash records. The NRF projects that holiday spending this season will reach unprecedented levels, potentially up to $966.6 billion.
This comes as over 200 million consumers shopped during from Thanksgiving to Cyber Monday, surpassing NRF's initial forecast of 182 million.
"The five-day period between Thanksgiving and Cyber Monday represents some of the busiest shopping days of the year and reflects the continued resilience of consumers and strength of the economy," said Matthew Shay, president and CEO of the National Retail Foundation. "Shoppers exceeded our expectations with a robust turnout. Retailers large and small were prepared to deliver safe, convenient, and affordable shopping experiences with the products and services consumers needed and at great prices."
Doom Spending Rising
Despite tumultuous market conditions, consumers have continued spending as Americans crank up approximately $1 trillion in credit card debt. This comes as 27% of consumers are "doom spending" to cope with stress, according to a recent study published by Intuit Credit Karma.
"Much like doom scrolling, we're seeing people mindlessly shop to soothe concerns about the economy and foreign affairs, which could take a toll on their financial well-being," said Courtney Alev, Credit Karma's consumer financial advocate.
Because of increased spending, roughly 32% of Americans have taken on additional debt. Most of the U.S. population (96%) is concerned about the state of the economy, with roughly 56% living paycheck to paycheck and 42% struggling to keep up with the rising food prices.
Approximately 48% of Americans are concerned about not having sufficient funds to afford rent, food, clothing and other necessities amid the surging cost of living. Approximately 22% of people don't have any savings whatsoever, and 52% have less than $2,000 in their emergency funds. The study also revealed that the overall savings rate has gone down significantly over the past six months, as 47% of Americans stated their savings fund has declined in the second half of the year.
The Big Dilemma: Save Or Live In The Moment
The younger generation is more susceptible to falling into a spending trap, as nearly 33% of Gen Z and 34% of millennials reported their expenditures to have increased substantially over the last six months. Their debt obligations have skyrocketed as well, with 38% of millennials reporting their debt levels have risen over the last half year.
According to a recent Prosperity Index study by Intuit, instead of reducing expenses, 73% of Gen Zers express a preference for living in the moment.
This comes despite 66% of Gen Z feeling they'll never have enough funds to retire, while 3 out 4 Gen Zers are hesitant to make long-term goals in the current market.
The markets are discouraging for young adults amid the ongoing cost of living increases and surging home prices crushing dreams of home ownership. But savings and investing can help the youth build some wealth.
"Every dollar you set aside will compound," said Ted Rossman, Bankrate's senior industry analyst.
