American consumers are spending more, even though most of them say they’re unhappy with the economy. For anyone tracking retail real estate, that gap between mood and behavior is worth examining.
Household spending rose 6.1% in the 12 months through August, according to the Commerce Department. That’s up from 4.3% growth at the end of last year. Second quarter economic growth was also revised higher, driven by consumer spending and business investment.
Chicago Fed president Austan Goolsbee pointed out that consumer spending, not AI data centers, has been the main engine of growth. He ties it to a stable labor market.
Why People Keep Spending
A few things are holding up demand. The job market has cooled from its post-pandemic surge, but unemployment is still historically low. Many older homeowners and stock owners have seen big gains in their net worth, which makes them more comfortable spending.
Spending growth has been fairly even across income groups, according to a New York Fed survey. People earning under $50,000 reported a 4.7% increase, while those earning over $100,000 reported 4.4%.
Consumer confidence is sitting near historic lows. The University of Michigan sentiment index is just above its record low from earlier this year. The Conference Board’s survey hit its lowest reading in 12 years last month. Gas prices, slow hiring and politics are all weighing on moods.
Economists say sentiment used to predict spending, but that link has weakened since the pandemic. As one NORC researcher put it, the numbers look good and no one is happy.
Not Everyone’s Spending the Same Way
The data also shows a split. Higher earners account for much of the spending growth. Middle-income households are hunting for value, and lower-income households are just trying to cover the basics.
Wealthier Americans are feeling better about the economy, too. Sentiment has improved for heavy stock owners since May 2025, while it’s dropped for those with no stocks at all.
Where It Shows Up in Retail and Leisure
Consumer-facing businesses are seeing solid demand. StubHub’s ticket sales rose 34% year over year last quarter, helped by World Cup demand.
Restaurant, furniture and travel companies have posted more modest gains, but say customers still aren’t afraid to treat themselves.
Back-to-school spending grew at a double-digit pace.
Mastercard expects holiday shopping to rise 5.5% this year, the fastest pace since 2022. About half of that is expected to come from higher prices. The National Retail Federation’s chief economist summed it up well. Consumers are spending based on their financial condition, not their feelings.
What It May Mean
Strong spending is good news for landlords and tenants, especially in dining, entertainment and experiential concepts. But the mix of rising prices, thin savings and heavy debt means demand could soften if consumers hit a wall. If you’re signing a lease, underwriting a deal or planning a new project, it pays to watch which shoppers are driving the sales. A center that depends on higher-income spending may look very different from one built around value-conscious households.
