SCOTT SIMON, HOST:
President Trump backed off this week on his threat to impose new tariffs on European goods in exchange for what he called a framework of a future deal involving Greenland. Polls show most Americans don't want the U.S. to take control of Greenland. They do want the president to focus more on the economy, especially the high cost of living. A survey from the University of Michigan this week shows Americans feel worse about the economy now than they did a year ago, but that bad feeling has not stopped people from spending money. NPR's Scott Horsley joins us. Scott, thanks so much for being with us.
SCOTT HORSLEY, BYLINE: Good morning. Good to be with you.
SIMON: And you have some sales receipts there. What do they show?
HORSLEY: Yeah. They show that even during the government shutdown this past fall, when people's mood about the economy hit bottom, they didn't dial back their spending. On the contrary, spending rose pretty sharply during the fall. Economist Tim Quinlan, who's with Wells Fargo, says the numbers suggest that despite people's deep funk about the economy, they continued to shell out not only for necessities like food and rent. We also saw more spending on things like recreation.
TIM QUINLAN: Growing faster than many people would have thought when there was a lot of hand-wringing about the impact of tariffs and, you know, a labor market that's losing momentum. But one way or another, the consumer just keeps finding a way to keep spending.
HORSLEY: Now, for some families, finding a way might mean dipping into savings or reaching for a credit card because in both October and November, spending increased faster than people's incomes did.
SIMON: And how long can, if I might put it this way, we keep that up before we run out of money?
HORSLEY: Well, there are already signs some families have hit the wall. Procter and Gamble said this week that some anxious shoppers are beginning to skimp on things like laundry detergent and even toilet paper. Now, presumably, that just means switching from P&G's Charmin to a cheaper brand. But, you know, there are lots of examples of kind of two-speed spending behavior, where upper-income families are able to splurge while lower-income families are just scraping by. The Darden restaurant chain, for example, has a wide variety of offerings, from the Never Ending Pasta Bowl at Olive Garden, which is just under $14, to a $90 wagyu filet at The Capital Grille. And CEO Rick Cardenas says Darden's doing fine, thanks to middle- and upper-income customers who are offsetting any cutbacks by those at the bottom.
RICK CARDENAS: The consumer's still resilient. They're being cautious, with the largest growth coming from our higher-income households. But there was a little pullback in those earning less than $50,000 in casual brands.
HORSLEY: Now, wealthier families might feel like they can afford to spend more because, you know, the stocks in their retirement account are doing OK and their home values are climbing, whereas people living paycheck to paycheck may feel like they have to tighten their belts.
SIMON: Scott, is there any help on the horizon for lower-income families?
HORSLEY: There could be some. They may get a bigger tax refund this year and perhaps see a little boost in their take-home pay, thanks to the GOP tax cut passed last summer, although we know most of the benefits of the tax cut are going to go to higher-income families. We talk all the time about how consumer spending is the biggest engine of the U.S. economy. Tim Quinlan notes that engine is increasingly driven by a relatively small slice of well-off shoppers.
QUINLAN: The unpleasant truth of it is the top 10% of households give you almost half of all of the overall spending. So if those households are doing well, that kind of papers over the struggles that people have at different levels of income.
HORSLEY: Carmakers, for example, have been reporting solid sales, even though it's getting harder for middle- and lower-income families to afford a new car. You can have a macroeconomy that looks pretty good on the surface, even if a lot of families are struggling to pay their bills.
SIMON: NPR's Scott Horsley. Thanks so much.
HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.
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