Consumer Debt and Spending Trends: EY-Parthenon's Will Auchincloss Explains

Consumer Confidence and Spending

• 📉 Consumers are reporting decreasing confidence in the economy, driven by concerns over inflation, job outlook, and the pressure on essential goods like food and housing.
• 🛍️ Despite lower confidence, headline retail sales growth for the holiday season is estimated to be around 3-4%, with e-commerce performing even higher.
• 📈 However, a significant portion of this year-over-year retail growth is attributed to price increases rather than an increase in sales volume.

Retail Sector Performance

• 🎯 Certain retail chains have successfully aligned their value proposition with consumer expectations, leading to increased resonance this holiday season.
• 🛒 Consumers are exhibiting more intentionality in their spending, seeking better prices and shopping across channels that best suit their needs.

Challenges for Restaurants and Debt

• 🍽️ The restaurant and bar sector is facing significant headwinds, with consumers repeatedly indicating it's the first category they will cut back on, especially higher-end establishments.
• 🏠 Consumers are shifting spending towards more in-home eating due to higher grocery prices, putting pressure on the QSR (Quick Service Restaurant) space.
• 💳 Consumer debt, particularly through "buy now, pay later" (BNPL) platforms, is emerging as a growing concern, with over 91 million Americans using these services.

Economic Drivers and Outlook

• 📊 Current GDP growth appears to be propped up by affluent consumers, asset price appreciation (stock market), and AI-driven investment.
• 🏦 A shift from a savings economy to a debtor economy is evident, as savings have declined since the pandemic and consumers are increasingly relying on debt to maintain purchasing power.
• ⚠️ The increasing debt levels across all income segments represent a potential headwind for 2026, raising questions about the sustainability of current spending patterns.