As prices have risen over the past year at a historic pace, consumers have responded in expected fashion: by cutting back purchases on everyday items. But another emerging trend clashes with conventional thinking — Americans are spending big on big-ticket items. A recent article in the Wall Street Journal describes this phenomenon as the “split-brain budget.”
Consumers are fatigued after spending the past 12 months making micro budget decisions. In December, retail sales fell 1.1% from November. But while that broader trend has played out for months, spending appears to have risen in categories like travel, experiences, and designer label products.
In a poll conducted this month, 30% of respondents said they had purchased a luxury good in recent weeks. Of that group, more than a third spent above $100 on that purchase.
After a long or busy day, have you ever stayed up extra late? Cultural scientists refer to this behavior as “revenge bedtime procrastination.”In essence, people are trying to reclaim what was lost, or to squeeze as much personal time in as possible. Spending on high-price items may be a form of “revenge” against inflation.
Retail therapy is no longer a stress-free act. Even a trip to the grocery store, which in prior years could be done on autopilot, now requires a constant analysis regarding affordability and potential replacements in response to price fluctuations.
Now, some consumers report they’ve hit their limit when it comes to that back and forth – leading to splurges elsewhere.
Luxury Looking Up
Even while retail sales declined overall, 2022 was a banner year for the luxury market. Meanwhile, consulting firm Bain & Company predicts that 100 million additional consumers will participate in the sector between 2022 and 2030.
Still, luxury brands must contend with inflationary pressures, with many offering fashion items at lower price points. The secondhand luxury market has exploded in response —the category was up 28% year-over-year in 2022. If you’re in the market for luxury goods now, not only would you not be alone – they might be more affordable than ever.
Still, the threat of inflation and an economic winter across industries continues to loom large.
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