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Why Americans won't do the one thing that would bring down high prices

Emily Stewart   

Why Americans won't do the one thing that would bring down high prices

We've all been there: staring down the price of a plane ticket, a new shirt, or a bag of chips and thinking angrily to ourselves, "Jesus Christ, this did not use to cost this much." And then … we buy it anyway.

Inflation has made a lot of things infuriatingly expensive, and consumer confidence isn't great. The economy is good on paper, but in the real world, a lot of people feel like they're trapped in place. Yet many of those same people continue to spend their way through it. Retail sales came in higher than expected in March, up 0.7% month over month to $709.6 billion. February's numbers were revised up, too. Consumers have proved themselves as the motor of the economy.

In short, America has become a nation of hate spenders.

"There is how consumers feel and what they're doing," Lydia Boussour, a senior economist at EY, said. "Consumers are not feeling great about inflation, but what the data is telling you is that even if they're not feeling great, they're still able to continue to spend."

That leaves the question: Why are we willing to spend through the pain? According to experts I talked to, the surge in hate spending can be attributed to various factors. For one thing, a lot of people still have the financial stability necessary to open their wallets. On a psychological level, many consumers are just throwing up their hands at the state of financial affairs. They're aware prices aren't going back to 2019 levels, and given everything everyone's just been through, they may as well live it up.

Take Jordan Hart, a writer in Illinois and self-described "cheap bitch." She told me that she often finds herself outraged by prices — and then ultimately succumbs to the forces of capitalism. Hart, 26, has developed a taste for Lululemon, despite previously scoffing at paying $100 for a pair of leggings. Most recently, she decided to spend $50 on a Stanley cup. She initially got a knockoff on Amazon, but it broke, so she's biting the bullet and going with the OG. It's cool and trendy, plus part of her New Year's resolution was to drink more water. She's channeling a familiar sentiment. Many consumers are still buying like crazy; they're just mad about it.

"I feel like, obviously, with inflation, everything is just getting obnoxiously more expensive," she told me. "But at the heart of it, our desire as a consumer and as people to have nice things has not gone away."

Some of what's happening here is simple macroeconomics: People's finances are in a good spot, so they can absorb the increased costs. The labor market is strong, and wage growth has been outpacing inflation for months. From 2019 to 2022, median household wealth, adjusting for inflation, grew by 37%. Some cracks have begun to emerge. People's savings have fallen after being boosted by stimulus checks and the lack of spending options during the pandemic, and credit-card and auto-loan delinquencies are on the rise. Lower-income households, in particular, are likelier to be struggling. Still, on the whole, Americans are doing well.

"We're looking at a consumer sector that's still in overall good financial shape," Boussour said. She thinks that moderation in spending will soon be on the horizon, though it's worth noting economists have been saying that for months now — eventually, something has to break, they've argued, but it's just not clear what or when that will be.

People have largely just accepted that the prices that are in the market right now are status quo. We've acclimated to these inflated prices.

Beyond the raw dollars and cents, there are a lot of mental and emotional factors going into people's willingness to suck it up in the face of higher prices. In American culture, consumerism is one hell of a drug. It's wrapped up in our identities, how we relate to the world and to each other. Many of us have a tendency to look at a problem or frustration and think, "What can I buy about this?"

Claire Tassin, a retail and e-commerce analyst at Morning Consult, told me surveys indicated that the sticker shock of inflation had worn off, meaning some of the hate spending comes down to resignation. Per Morning Consult, the share of people who say they're paying more for products now than they were a year ago is back to 2021 levels, even as prices continue to climb.

"People have largely just accepted that the prices that are in the market right now are status quo," Tassin said. "We've acclimated to these inflated prices."

There's also a level of YOLO splurging going on among a lot of consumers. They're buying tickets to see Taylor Swift and booking summer trips to Europe, deciding they deserve a treat (or several) after living through a pandemic. People figure, "Hey, if I can't buy a new home right now or upgrade my job or car, taking a vacation seems like a decent alternative, even if I am paying more than I'd like." The consumer COVID hangover is lasting longer than many observers expected, in a way that opens up the question of whether this you-only-live-once attitude will last forever. If consumers hadn't gone along for the ride on price hikes, companies couldn't have undertaken them in the way they did. Financial products such as buy now, pay later have also made it easier to buy something you can't entirely afford at this very minute.

"I don't know what would force us to hit the breaking point for this degree of consumer spending," Tassin said.

At the same time, conspicuous consumption — as in buying goods and services to show off a level of status — is back on the rise among demographics that are once again jonesing to try new brands and becoming less sensitive to prices. While lower-income consumers are trading down from expensive name-brand products to cheaper alternatives in an effort to save money, some younger and higher-income consumers are trading up and shrugging off the higher costs that come with that, even if it irks them.

"They want to achieve a higher social status. They want to live a life that impresses others, and being part of the popular crowd is important," Tassin said. "Part of it is just like, 'This is what it costs now. And yes, it's a lot more expensive than it used to be, but it's still important to me to keep spending.'"

The misalignment between people's stated attitude toward prices and their actual behavior isn't that outlandish — our intentions and emotions often don't match our actions. People say they want to eat healthy all the time and then find themselves in the ice cream aisle. It's easy to say you want to cut back on spending, given high prices, but when a friend asks whether you want to go shopping, it's hard to say no.

Ravi Dhar, a professor of management and marketing and the director of the Center for Customer Insights at Yale School of Management, told me there's a sort of decoupling going on between people's current situations and how they feel about the future. They see a headline about people getting laid off, or they know there's a global conflict going on, so they feel more pessimistic about the economy and worried about costs. But when it comes down to actually paying, they still have a job and maybe even got a raise, so they pony up.

"They have uneasy feelings about the future and how it might change, whereas expenditures and spending now is determined by the current state of affairs," Dhar said. "Their predictions have become more pessimistic, but not their behavior."

There is, of course, a needs vs. wants question here. Some items are necessities — a home to live in, food on the table, gas in the car, childcare, healthcare. Consumers are understandably frustrated at the costs of these things. But in some instances, people conflate what is a need, what's a reasonable expectation, and what sorts of trade-offs they perhaps should make to achieve their financial goals. None of us have to subscribe to six streaming services or escape to a lavish weekend getaway, even if we tell ourselves that's what we deserve for stomaching the workday and staring down a grocery bill that's much higher than it used to be.

"To the outside, that might look like a luxury but to them it says, 'Hey, this, I need all this for my sanity,'" Dhar said.

People are averse to loss, and having to change their lifestyle to fit newfound financial constraints feels like losing. There's an element of stubbornness here — of course, that dress in the closet is just fine to wear to that party, but getting the new one is more fun and exciting, even if the accompanying price tag is annoying. It'll be something interesting to complain about at said party later.

To the outside, that might look like a luxury but to them it says, 'Hey, this, I need all this for my sanity.'

Reporting for this story, I heard from all sorts of people about their hate-spending habits. One woman told me she despised spending over $1,000 on an iPhone, even as she insisted on replacing hers at least every two years (she figured she should have one that works "awesome"). And, like many people, she won't switch to another brand. One man said he'd really gotten into couponing and racking up points at his local grocery store, but sometimes, he's just got to have that bag of Doritos, even if it costs the price of two bags three years ago. People cited angrily buying dog toys, fancy chocolates, deodorant, and $9 Chex Mix at the airport. Some mentioned doing more inevitable — and even more rage-inducing — spending on big-ticket items like rent. Upon reflection, I've realized I have two categories of expenses I love to hate: martinis at half-decent New York restaurants and my internet bill.

Most people were aware that many purchases were things they could go without. The Doritos guy knows he could go without the premium channels in his cable package, but he doesn't think his bill would come down far enough to warrant the sacrifice. By the end of my conversation with the iPhone lady, she said she'd started to wonder whether it might be better to wait to make the purchase — the crack in her screen would be easy and cheap enough to fix. But she doesn't have a lot of other big expenses at the moment. It's not like her car's broken down, so she'll probably go ahead and buy a new phone. She feels like it's an investment in herself. Hart, the Illinois writer with a brand-new Stanley cup, sees some of her spending as a way to reclaim power.

"You don't have a choice in the economy and inflation and how that's affecting you, but you kind of have a choice in how much you let it alter your lifestyle," she said. "It feels like you're admitting defeat if you're just like, 'Well, now it's just expensive, so I won't do it.'"

In a hyperconsumerist society like the one we live in, it's a notion that tracks. Maybe we're all angry spending soldiers, refusing to be deterred.

Emily Stewart is a senior correspondent at Business Insider, writing about business and the economy.

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