Mastercard Economist: Consumers Spending Despite Inflation and Uncertainty

Consumer Spending Outlook

• 🚀 Despite headlines about inflation and tariffs, consumers are actively spending, according to Mastercard's Chief Economist Michelle Meyer.
• 📊 Mastercard's spending pulse data showed 3.5% year-over-year growth in retail sales (excluding autos) in October, aligning with their holiday forecast of 3.6%.
• 📈 Spending has accelerated into November, with notable engagement in apparel and in-store purchases.

Drivers of Consumer Engagement

• 💰 Higher-income consumers benefit from healthy balance sheets, boosted by equity appreciation and prior home value increases, creating a positive wealth effect.
• 🧠 These consumers also possess greater confidence in future income streams due to a financial buffer, supporting their spending.
• 💼 However, broad engagement is observed across income levels, largely supported by a robust labor market.

Sentiment vs. Actual Spending

• ⚠️ Sentiment surveys have proven to be unreliable indicators of actual consumer behavior in recent years, often reflecting political divergence and uncertainty.
• ✅ For the average consumer, job security and incoming income, with wage growth still outpacing inflation, are key drivers, especially for those with improved balance sheets.

Inflationary Landscape

• 🧩 Inflation is highly divergent across categories, with goods, particularly those with high import shares like toys, experiencing significant price increases.
• 🛒 Consumers are expected to actively seek value and shift their spending baskets to navigate these relative price shocks during the holiday season.