Americans continue to have a spending problem.
According to the National Retail Federation (NRF), retail sales for the full year grew 3.6% over 2023 to a record $5.28 trillion. The U.S. Census Bureau 2024 holiday season sales grew by 4% to a record $994.1 billion in 2024 compared to 2023.
The most recent Consumer Stress Index from the Kearney Consumer Institute shows that how consumers feel about their personal financial security is improving however. In quarter four of 2023, 70% of respondents said their income was keeping up with their cost of living. In last year's fourth quarter, that number jumped to 72%.
Bankrate Senior Industry Analyst Ted Rossman said despite spending rates growing and some people feeling uneasy about their finances, the economy is doing better than most people think.
"The unemployment rate's down to four percent, wage growth has been solid and outpacing inflation for a couple of years now," he said.
People not feeling great about the economy does seem to come back to inflation.
"Psychologically, that's really been hampering consumer sentiment," Rossman said. "Everything costs more, but because of so many people working and getting raises, they are able to absorb these increases, they're just not happy about it."
New levels of spending started to pick up during covid. Right after the pandemic, there was a surge in experiential spending. After spending much more time at home and not out to eat or on vacations, people really started to unleash their wallets on things.
"I feel like we're starting to get into a more normal equilibrium but it's also worth noting that everyone's experience is different.
Unfortunately, lower income families have been hit the hardest by inflation with not much room to spare to cut from their budget if needed to.
Overall, Rossman believes the economy is in pretty good shape at the moment. If extra income is needed, there's always options out there for people.
"Maybe it's a side hustle or a new job or asking for a raise at work," said Rossman. "Maybe it's cutting back on expenses too."