Yahoo Finance

Consumers say they are stressed about money. But consumers are also spending money – in some cases in record numbers.

According to data from the U.S. Census Bureau, retail sales during the 2024 holiday season grew an unexpectedly high 4% over 2023 numbers to a record $994.1 billion. That was higher than the forecasts by the National Retail Federation, an industry trade group. And sales for the full year grew 3.6% over 2023 to a record $5.28 trillion, the Retail Federation said.

So what gives?

There's a disconnect between the perception of cash-strapped consumers and the reality that holiday spending and travel were up, said Katie Thomas. Thomas leads the Kearney Consumer Institute, an internal think tank at the global strategy and management consulting firm, Kearney.

Are consumers stressed about finances?

The institute just released its latest quarterly Consumer Stress Index, which provides a view of consumer sentiment through questions it asks 2,000 U.S. consumers in a variety of income and demographic sectors.

The survey provides insights into how consumers are feeling.

"Am I stressed about my own personal situation versus am I going to say I'm concerned about the economy?" Thomas said.

Thomas said going into the last quarterly survey after the November elections – where consumers said the economy and inflation were the No. 2 factors determining their voting – and seeing that the malls were packed and consumers were shopping online in high numbers, made her want to get a gauge of how consumers were truly feeling and acting.

Thomas wanted to figure out "are we as stressed out about money as we say we are?"

Thomas acknowledged that there is typically about "one-quarter to one-third of people who are definitely feeling the pressure and feeling the heat" of monetary stress.

However, according to survey results, consumers' feelings about their personal financial security are improving. In quarter four of 2023, 70% of respondents said their income was keeping up with their cost of living. In the fourth quarter of 2024, 72% said the same.

Consumers, including Thomas, have noticed prices have gone up. A $60 trip to the grocery store is now probably $80, she said.

"That's real and I notice it, but it doesn't mean I can't afford it or that I bought a little bit less," she said. "So it's sort of that say-do gap."

How do consumers feel about food and housing costs?

Here are some other survey results on consumer sentiment:

◾ Food affordability: Seventy-six percent of consumers in the survey said "being able to afford food is generally not a concern or occasionally concerning (versus worried about it regularly). That compares with 78% of consumers who answered that way a year ago.