How Are Consumers Still Spending So Much?

Key Takeaways

• Consumer debt rose to $18.8 trillion, but assets hit $190 trillion.
• Bottom 50% saw 131% net‑worth growth, outpacing wealthier groups.
• Money‑market funds surged to $7.8 trillion, fueling household liquidity.
• Credit‑card and student‑loan delinquencies rise, but foreclosures stay low.

Pulse Analysis

Even as inflation, gas price spikes and a softer labor market dominate headlines, U.S. consumer spending has defied most recession forecasts. Retail sales climbed from $250 billion in 1995 to $638 billion in April 2026, and airline passenger counts hit record levels in 2024. The underlying driver is a dramatic shift in household balance sheets: total consumer debt increased to $18.8 trillion, yet total assets swelled to roughly $190 trillion, creating a two‑to‑one asset‑to‑debt ratio that cushions discretionary outlays. The resilience also reflects lingering pandemic‑era savings that have been redeployed into consumption.

That balance‑sheet expansion stems from broad‑based wealth gains. The bottom half of earners posted a 131 percent increase in net worth between 2020 and 2025, outpacing the top decile’s absolute holdings. Real‑estate equity rose steadily, reaching about $34.15 trillion, while money‑market fund assets exploded from under $1 trillion in 1990 to $7.8 trillion today, providing households with liquid buffers. At the same time, wages have kept pace with inflation, reinforcing purchasing power and encouraging spending on travel, dining and durable goods. These gains have been amplified by low‑interest rates that made borrowing cheap and investment returns robust.

Nevertheless, the picture is not uniformly rosy. Delinquency rates on credit‑card, student‑loan and auto balances have ticked upward, signaling stress among borrowers who are already stretched. Foreclosure and bankruptcy filings, however, remain near historic lows, suggesting that the surge in mortgage debt—now about 70 percent of total liabilities—has not yet translated into widespread defaults. A sharp rise in unemployment or a prolonged equity market correction could erode household wealth and reignite a spending slowdown, a risk investors and policymakers must monitor closely. Analysts therefore watch credit‑quality metrics and employment data as leading indicators of any shift in consumer confidence.