In this Bloomberg article, there was a discussion about the U.S. Economy's interest rates being high while consumers are continuing to purchase as if rates were along the historical average. The high rates of consumer spending, values that are surpassing pre-pandemic averages, are driving economic growth. This spending behavior could be explained by the rate of inflation dropping from 9% this time last year to about 3.7% today. "And yet that very same inflation has also boosted incomes, which have risen even after adjusting for inflation."
However, this does not mean that American consumers are happy with the rise in prices. Despite their income increasing due to inflation, consumers are consistently posting negative spews about how items have become too expensive. The article suggests this behavior can be described as a "frequency illusion," where as more media sources cover high inflation, then more consumers are looking for examples of inflationary prices to confirm this thought.
What do you think is creating the gap between attitude ("these prices are too high") and action (consumers spending at higher rates compared to previous years)? Will this spending continue to increase as we approach the holiday season?
