Shoppers are splurging, but feel bad about it

The old adage “actions speak louder than words” applies to how America’s shopping these days: Consumer data shows that although we feel nervous cracking open our wallets, we’re doing it anyway and wallowing in retail therapy.

Spending at US retailers rose 0.5% in July, according to the Commerce Department, which also revised its June sales number upward to 0.9%. That news comes on the very day that the University of Michigan found consumer sentiment fell 5% from July to August, the first drop in four months, and an unexpected one at that.

These seemingly contradictory findings actually make sense from a human behavior standpoint: Feelings come first, and lead to action later on.

“Sales data captures present realities, and sentiment tends to reflect future intent,” Savage Growth Partners CEO Jensen Savage told Brew Markets. “Big-ticket or event-driven purchases can spike spending even if people feel anxious overall.”

Americans have good reason to feel jittery: The US job market is seriously losing steam as tariffs and inflation loom. UMichigan found that Americans expect prices to rise by 4.9% in the year ahead, up from July’s 4.5%.

“Consumers are anticipating rising costs,” said Savage. “So it would make sense to see consumers front-loading purchases with a ‘buy now before prices increase’ mentality.”

So what are Americans buying, anyway?

Consumer spending surged in nine out of the 13 categories tracked by the Commerce Department, and the biggest winner at the register was the grandest splurge of all: cars. Auto dealers enjoyed a 1.6% boost in sales, while furniture came in a close second at 1.4%. Online sales also got a good 0.8% bump, boosted by mega-sales such as Amazon’s extended Prime Day, Walmart’s “Deals” week, and Target’s back-to-school promos.

The biggest losers? Home improvement posted a 1% loss, followed by electronics (-0.6%) and restaurants and bars (-0.4%). Because let’s face it, when wallets feel slim and moods are grim, no one wants to nab the latest iPhone when the one you have works fine, or blow $20 on bowlslop for lunch, or grab a craft beer when many of your bar buddies are ditching booze anyway.

“Americans are skipping the $17 martini salad and redeploying to big-ticket bargains and online deals,” explained chief investment officer at Running Point Capital Advisors Michael Ashley Schulman, adding that some may have pulled forward car buys ahead of tariff noise and expiring EV credits. “Surveys say ‘I’m worried’; swipes say ‘but that washer’s 20% off.’”—JD