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We are joined now by Michelle Meyer, Mastercard Economics Institute chief economist, Michelle. I won't ask you about your personal shopping habits, whether you just go to Walmart, or whether you run around to a lot of different stores. What I will ask you about is not just the data we got today, but the wealth of numbers that you guys have there at the Mastercard Economics Institute and whether what you're seeing comports with what we heard today.

Sure. Well, I'm happy to answer your question. I do tend to run around, but mostly online. So that I think is the big distinction. It's very simple or to see a lot of the different choices out there when you're shopping online. And that's actually what we're seeing in a lot of the data as well, which is this strong growth in terms of e-commerce. When we look at our own spending pulse figures, we saw over 8% year-over-year growth last month in online shopping. Apparel online in particular did quite well in the month of July, growing just over 5% on a year-over-year basis. So I think the consumer right now has a lot of choices, right? We're seeing that some might have that preference to go to big box retailers and really have that efficient shopping experience, as others are certainly looking for those choices and those options that you can get in terms of e-commerce. And then others, maybe like usually are still very willing to physically go around to all the different stores. I run around online too, to be fair.

Okay. Michelle, what do you make of, or I guess what's your takeaway from higher income consumers continuing to go to Walmart? My first assumption is that they're trading down from Target, but when did a trip to Target get too expensive for a family pulling in $200,000 a year?

Well, I think there's lots of different narratives out there, but to me what's most important when thinking about what's driving consumer preferences and consumer choices is how they're thinking about, one, their time management, which we just talked about, but also, two, the path of the labor market and their own personal finances. So that's going to be a function of what they're seeing in terms of job growth, wage growth, it's going to be driven by what they're seeing in terms of their own balance sheets, in terms of wealth gains, what they're managing on a debt level. So there's not one story fits all that high income they're going here or mid-income is going there and low income is going there. I think it really is a function of everybody's own personal finances at this point.

And yet, Michelle, if you look at the numbers, higher income consumers remain more confident, at least if you look at the University of Michigan Sentiment surveys, right? It's very interesting to look at the top third of income versus the bottom third of income, and there is a gap there. There you're seeing the chart, so the upper line there has been trending upward, the bottom line has not. And I think the question we always tend to ask is, when you look at the economy as a whole, will that higher income consumer be enough to support consumer spending sort of on its own?

Well, I think that chart is super interesting that you have up on the screen which shows that that purple line, the high income sentiment generally trends above other cohorts, particularly in times of expansions. When you have downturns, then there's a bit more convergence. And part of it has to do with the ability of a higher income consumer to smooth through their, through their life cycle, right, in terms of their spending. There's more buffers out there, whether it's savings buffers, or it's what's happening in terms of wealth appreciation. And I would argue in this cycle, we've certainly seen very strong household wealth appreciation, right, financial assets, housing assets, it's been a good amount of appreciation there, and that is providing a positive wealth effect. So to me, when you look at the different drivers, again, yes, I think the income cohort that you're in, the exposure that you have to wealth gains matters, but it also very much matters what sector of the economy you're in in the sense of what's happening around the labor market as well.

Michelle, thinking back to all your years of doing this, studying economic data, what does your data say about how the US consumer will act or spend around the election season, but not just in the lead up to the election, the aftermath of the election where we don't have an outcome initially known?

Yeah, so it's actually quite interesting when you look at consumer trending consumer spending around these moments in time such as an election. You don't tend to see very clear patterns. You do look at things like sentiment surveys or uncertainty measures, those tend to be higher heading into elections and right after elections, people just have a lot of questions, you know, a little bit less clear in terms of where the trajectory might be going. But in terms of overall spending, it really just very closely trends with what's happening in terms of those key drivers for spending, and that's where I'd focus on the labor market. So the uncertainty shocks, if you look at the literature, the uncertainty shocks tend to be much more meaningful for corporates than it is for the average consumer.

So basically, Michelle, Nvidia's stock price goes up in the fourth quarter, people are out there spending, right? You don't have to answer that, I'm just tossing it out there. Just saying.

The wealth effects in play.

Exactly. The wealth effect. What's also interesting to me is what people are spending on, Michelle, that you were talking a little about earlier, and maybe it's a little bit surprising to see online apparel come back, for example. You know, we had the narrative for a long time that people weren't buying as much stuff because they were going on trips, because they were going to concerts, right, etc., going to sporting events, and that narrative seems to be maybe becoming a little bit more nuanced as well. What are you seeing?

I think it's always been nuanced. I think this whole cycle since the pandemic has been really unusual on that where the narrative has been really hard to gauge in terms of one solid story, right? When you think about coming out of the pandemic, it was all about buying these big ticket items, durable goods, everything you need for your home, and then that really had a bit of a downturn as the experience economy came roaring back and we saw this prioritization for experiences. So depending on what sector you were following then, your narrative was going to be very, very different. I think where we're settling now is one which hopefully will feel a little bit more balanced, a bit more normal, a new normal, but maybe a little bit more normal and stable, where you don't necessarily have as large of swings across the different sectors. So this return to some greater growth in terms of apparel, online apparel, which we saw in our data, it could be a function of, you know, new people wanting to buy things for back to school, or new launches of items that are appealing. People are making choices, whether they want to, how they want to prioritize their dollars, and I think that we're now seeing again some more stable hopefully trends now that we're further away from this pandemic distortion.

Yeah, I've been buying some stuff for my upcoming vacation, but I am returning much of it. To our point about going all around for online shopping. Thanks a lot, Michelle, it's always great to see you.

You as well, Julie and Brian, thank you.