Journal Article

Negative Sentiment toward Spending and Declining Real Incomes May Meaningfully Lower Consumption

Abstract: Despite a contraction in real GDP in the first half of 2022, consumer spending has remained resilient. We examine a set of factors that have historically affected consumption growth and find that excess savings have boosted consumer spending during the COVID-19 pandemic. However, as excess savings decline and economic relationships normalize, negative sentiment toward spending and declining real incomes may meaningfully lower consumption.

Keywords: consumers; consumption; pandemic; savings;

JEL Classification: E20; E21;

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Bibliographic Information

Provider: Federal Reserve Bank of Kansas City

Part of Series: Economic Bulletin

Publication Date: 2022-11-04

Issue: November 4, 2022

Pages: 4