Many consumers are expressing financial stress, yet spending seems to be on the rise, reaching unprecedented levels.

Data from the U.S. Census Bureau indicates that retail sales soared 4% during the 2024 holiday season compared to 2023, totaling nearly $994.1 billion. This figure exceeded projections from the National Retail Federation (NRF), a prominent trade organization. For the entire year, retail sales climbed 3.6% over 2023 to hit a peak of $5.28 trillion, according to the NRF.

So what’s happening here?

There seems to be a gap between how consumers feel about their finances and the reality of increased holiday spending and travel, explains Katie Thomas, who heads the Kearney Consumer Institute, a research entity at the global consulting firm Kearney.

Are consumers feeling financial strain?

The Institute recently published its latest quarterly Consumer Stress Index, shedding light on the attitudes of consumers based on feedback from 2,000 individuals across different income levels and demographics.

This survey aims to capture the emotional landscape of consumers.

“How do I differentiate between my own personal worries and concerns about the broader economy?” Thomas queried.

In the context of November’s elections, where voters highlighted economy and inflation as major issues, Thomas noted the unusual sight of crowded malls and high online shopping activity, prompting her to explore consumer sentiment further.

Thomas aimed to discern “are we really as worried about finances as we say we are?”

She acknowledged that “around one-quarter to one-third of people definitely feel the strain” of financial stress.

Nonetheless, the survey revealed an improvement in consumers’ perceptions of their financial well-being. By the last quarter of 2023, 70% of respondents felt their income was keeping pace with their living costs, which rose to 72% in the fourth quarter of 2024.

While acknowledging rising prices, Thomas mentioned that while her typical grocery bill of $60 has jumped to about $80, it does not automatically imply financial incapability or reduced spending. “It’s that mismatch between what we say and how we act,” she remarked.

Insights on food and housing expenses

Here are some additional findings from the survey concerning consumer attitudes:

• Food affordability: Seventy-six percent of those surveyed indicated that “affording food is not a major concern or is occasionally troubling,” a slight decrease from 78% last year.
• Housing costs: 71% of participants reported that changes in housing or rent prices haven’t significantly affected them, or that while costs have risen, they still feel comfortable. This is down slightly from 72% a year earlier.
• Job security: 28% expressed that losing their job would complicate finding new employment, which marks a rise from 24% a year prior but is a drop from 31% in the third quarter of 2024’s survey.
• Consumers’ adaptability: Over 80% confirmed their ability to make lifestyle adjustments to reduce living expenses.

Outdated perceptions of ‘fair’ pricing

The survey highlighted that consumers’ instincts regarding appropriate prices—such as the cost of a dozen eggs or household cereal brands—are stuck in a past mindset.

“Prices for essential goods, ranging from food to housing and dining, have surged more than 20% between 2019 and 2024; however, wages have mainly kept pace,” Thomas noted in her survey analysis. “Thus, even if consumers are shocked by grocery prices, they aren’t disproportionately spending a larger share of their income there.” Additionally, 61% stated they have maintained similar purchasing habits over the last six months despite price increases.

Grocery prices may not reflect true consumer spending

Traditionally, grocery prices have served as a barometer for consumer economic health, but Thomas argues this is becoming outdated. With numerous options available in brands and stores, many consumers, including those in higher income brackets, are seeking value by shopping at retailers like Aldi, Walmart, and Dollar Stores. This is not viewed as “downgrading,” she noted, but rather as a strategy to save for discretionary spending on things like vacations.

During its recent earnings call, Walmart noted a significant uptick in affluent shoppers earning over $100,000 annually.

Consumers are also expressing concern about increased prices and trade issues stemming from tariffs. There has been a noticeable seven-point rise in worries related to these topics, Thomas reported.

Betty Lin-Fisher is a consumer reporter. Follow her on X, Facebook or Instagram @blinfisher.