The Consumer Sentiment vs. Consumer Spending Puzzle

Summary

---

Planet Money (NPR)

Episode: The Consumer Sentiment vs. Consumer Spending Puzzle
Date: November 21, 2025

---

Overview:

This episode explores the puzzling disconnect between low consumer sentiment and high consumer spending in the U.S. economy. Despite Americans feeling historically pessimistic about economic conditions, overall consumer spending remains robust, propping up an economy that, on the surface, appears strong. Planet Money unpacks why this is happening, focusing particularly on the roles of wealth, income distribution, and the influence of financial markets.

---

Key Discussion Points & Insights

1. The Traditional Link: Consumer Sentiment and Spending

• Consumer sentiment (how people feel about the economy) and consumer spending (how much they actually spend) typically move together.
• When sentiment is low, spending generally drops as people cut back (00:39).
• Kenny Malone: “Consumer spending and consumer sentiment are like buddies that go everywhere together.” (00:39)
• But… In 2025, consumer sentiment is near its lowest point in 50 years, yet consumer spending is strong (00:19–01:17).

---

2. The Breakdown: Disconnected Buddies

• Kenny Malone: “These buddies, something strange is happening to their friendship. They're drifting apart.” (00:57)
• Sentiment is “sad in his sweats on the couch,” while spending is “out there living it up, spending untold amounts of money out all hours of the night at the club.” (01:04–01:17)
• The hosts note this is unusual, and economist Diren Patke of the Boston Fed expresses “bafflement” at the divergence (01:25).

Diren Patke: “We see these two numbers...moving in ways that look discordant with each other. That gives rise to a question about why that might be happening.” (01:25)

---

3. Consumer Spending’s Outsized Economic Importance

• Around 2/3 of U.S. GDP comes from consumer spending—groceries, dining out, travel, goods, and services (02:03).

---

4. How Do We Measure Sentiment and Spending?

• Both are primarily calculated through surveys, which are flawed; people may misreport or forget purchases, especially at high income levels (03:34–05:47).
• Wealthier people may underreport lavish purchases (“You might have bought a yacht… those kinds of things you’re probably not going to report.” —D. Patke, 04:59).

---

5. The Puzzle: Spending Strong Despite Headwinds

• “Before COVID, you typically saw consumer sentiment reflect consumer spending fairly well.” (06:15)
• Usual economic theory predicts that high interest rates, inflation, and tariffs (all present in 2025) should curb spending—but they have not (07:00–07:52).

---

6. Cracking the Case: Who’s Still Spending?

• Post-2008, the Federal Reserve has access to bank-level data on credit card spending—less prone to memory errors than surveys (08:10–09:12).
• Statistic: In May 2025, Americans spent $300 billion using credit cards (09:27–09:34).

Income Breakdown of Spending:

• The top 20% of income earners account for over half (about $175 billion) of credit card spending monthly (10:12).
• Over the past decade (even adjusting for inflation), spending by the top quintile is up 86%, compared to a 50% increase for the lowest quintile (10:47).

Diren Patke: “Of that $300 [billion], about $175 billion came from the very highest fifth of the income distribution.” (10:21)
Sarah Gonzalez: “The wealthiest consumers are spending billions and billions more than they used to.” (10:47)

• Conclusion: The robust economic data is mainly thanks to high earners' continued, elevated spending (11:09–11:37).

---

7. Insulation from Economic Turbulence

• Wealthy consumers are insulated from inflation, interest rates, and tariffs that slow other groups' spending (11:42–12:39).
• They are still spending extravagantly (e.g., $19.99 for a single Japanese strawberry) (12:15).

---

8. Why the Wealthy Can Spend More

• Rising wages: Strong growth for the wealthy (12:24).
• Asset appreciation: Home values and stock prices have soared, further boosting confidence among high-income households (12:39–13:01).

---

9. Potential Vulnerability: A Top-heavy Economy

• With so much spending relying on the wealthy, shocks to their wealth or the stock market could dramatically affect overall consumer spending (13:30).
• If lower-income Americans receive a shock (e.g., job loss), the overall economy wouldn’t be as badly impacted as a shock to high earners (14:08).
• Jenga Tower Metaphor: The economy is like a “top heavy Jenga tower”—seemingly stable, but precariously reliant on the few at the top (14:44–15:37).

Peter Atwater: “All of the economic strength in this economy [is] at the very top. And so our Jenga tower economy is creating an illusion of prosperity.” (15:03)

---

10. The "K-Shaped" Economy

• Economists use letter shapes to describe recoveries: V (quick), U (slow then up), L (sharp drop, flat). Atwater coined the “K-shaped” recovery:
  • Upper arm: White collar, investors rising ever higher.
  • Lower arm: Blue collar, less affluent falling further behind (17:30–18:44).

Peter Atwater: “A K shaped economy is one where...the top of the K are moving upward...while for those at the bottom, they're falling further and further behind.” (18:20)

• Real-world examples:
  • Delta: More revenue from first-class than economy for the first time (18:56).
  • More car models cost >$100k than <$30k; used car defaults are rising (19:10).

---

11. Stock Market: Driver & Fragility

• “At the top of our economy today, the markets are the economy.” (20:11)
• The robust stock market (driven by a handful of giant tech stocks, dubbed the “Magnificent Seven”) is buoying the wealthy’s spending—and thus the overall economy (20:20–20:43).
• If these high-flying stocks wobble, the whole “Jenga tower” of the economy could tumble (20:56–21:00).

---

Notable Quotes & Memorable Moments

• Kenny Malone: “These buddies, something strange is happening to their friendship. They’re drifting apart.” (00:57)
• Diren Patke: “We see these two numbers...moving in ways that look discordant with each other.” (01:25)
• Peter Atwater: “Our Jenga tower economy is creating an illusion of prosperity...you end up deceiving yourself in terms of the strength of the American economy today.” (15:03, 15:37)
• Peter Atwater: “A K shaped economy...those at the top...are moving upward...for those at the bottom, they’re falling further and further behind.” (18:20)
• Peter Atwater: “At the top of our economy today, the markets are the economy.” (20:11)

---

Important Timestamps

• 00:19: Consumer sentiment is at a half-century low
• 01:04–01:17: Sketch of sentiment (depressed) vs. spending (partying)
• 03:34–05:47: Limitations of economic surveys
• 06:55: COVID as a breaking point in the sentiment-spending correlation
• 08:10–09:12: The Fed’s credit card data analysis
• 09:27–10:21: Income breakdown of monthly credit card spending
• 11:09–12:39: How the wealthy are buttressing consumer spending
• 13:30–14:44: The vulnerability of a top-heavy economy
• 15:03: Introduction of the Jenga tower metaphor (Peter Atwater)
• 17:15–18:44: Introduction of the K-shaped recovery concept
• 18:56–19:10: Real-world manifestations: First-class air, expensive cars
• 20:11–20:56: The market’s outsized role and looming risk

---

Tone & Style

The episode embodies Planet Money's signature witty, conversational style. The hosts use playful banter and real-life metaphors (e.g., “buddies,” “Jenga tower,” “K-shaped recovery”) to make complex economic issues accessible and entertaining, yet never shy away from hard truths about inequality and systemic risk.

---

Summary

Bottom line: The main driver of America’s robust spending (and thus “good” economic data) in late 2025 is increased spending by the wealthiest households, insulated by booming asset values and confident in a soaring stock market. Meanwhile, low consumer sentiment and increased struggles among lower-income Americans are being masked by the spending at the top. The economy looks healthy, but this façade is precarious—like a Jenga tower: if the wealthy stop spending due to a hit to their wealth or the stock market, the illusion could quickly unravel.

---

Transcript

[A]

This message comes from NPR sponsor Charles Schwab. Financial decisions can be tricky. Your biases can lead you astray. Financial Decoder, an original podcast from Charles Schwab, can help. Download the latest episode and [e-mail] FinancialDecoder.

[B]

This is Planet Money from NPR. Consumer sentiment is not doing great right now. It is close to its lowest point in half a century.

[C]

Americans are, on average, not optimistic about the health of the economy. They don't feel great about their jobs, their personal finances.

[B]

And when consumers don't feel hopeful about the economy, we usually do this one thing. We save more and stop spending as much. You can see it in the data. When consumer sentiment is low, consumer spending slows down. Consumer spending and consumer sentiment are like buddies that go everywhere together.

[C]

Yes, but Sarah, these buddies, something strange is happening to their friendship. They're drifting apart.

[B]

Yeah, consumer sentiment is like, sad in his sweats on the couch doing nothing.

[C]

Well, okay, yeah, but consumer spending is out there living it up, spending untold amounts of money out all hours of the night at the club.

[B]

She sure is. And when Diran Patke, an economist at the Boston Fed, saw this rift, I.

[D]

Mean, it's mostly bafflement, right? We see these two numbers, which are significant measures of barometers of economic activity moving in ways that look discordant with each other. That gives rise to a question about why that might be happening.

[B]

For some reason, despite many not so great economic factors, not just the low consumer sentiment, consumer spending is strong, and it's making the economy look pretty good. Resilient, actually. But is it? Hello and welcome to Planet Money. I'm Sarah Gonzalez.

[C]

And I'm Kenny Malone. Consumer spending is a significant barometer of our economic health.

[B]

Consumers buying groceries, going out to eat, going to the club, buying a new car, a plane ticket, buying goods and services makes up more than 2/3 of US economic activity. It is of our GDP. So if consumer spending is strong, it's usually a sign that our economy is healthy.

[C]

But today on the show, is that still true, though? Or is something going on with consumer spending that is distorting our view of the economy? It's not just bottle service, everybody.

[A]

It might be.

[C]

It actually might be.

[A]

This message comes from at&t. America's first network is also its fastest and most reliable based on RootMetrics. United States Root Score Report 1H2025 tested with best commercially available smartphones on three national mobile networks across all available network types. Your experiences may vary. Rootmetrics rankings are not an endorsement of ATT when you compare, there's no comparison.

[E]

AT&T this message comes from Superhuman, the AI productivity suite that gives you superpowers everywhere you work with Grammarly, mail and coda coming together. You get proactive help across your workflow so you can outsmart the chaos experience. AI that proactively helps you go from to do to done faster. Unleash your superhuman potential today. Learn [e-mail] podcast that's superhuman.com podcast the.

[B]

First thing you should know about the data we have on consumer sentiment and even much of the data on consumer spending is they're based on surveys. We survey people to get all kinds of information, including how they feel about the economy and about their recent purchases.

[C]

And listen, Diren Patke, senior economist at the Boston Fed, loves a good survey.

[B]

Loves a good survey.

[D]

I'm extremely compliant when it comes to surveys because I use the data. So I'm very. I do always participate. I have never been a selected participant in any of the consumer surveys.

[B]

Are you dying to get a call?

[D]

You know, I would be very happy.

[B]

To participate, but that's how I feel about jury duty.

[D]

But that's the nature of random selection.

[C]

So you really want to be on jury duty? That is what's happening.

[B]

I was summoned once and dismissed immediately. Like, no one even asked me questions. Like, I just waited in the room and then I left.

[C]

Anyways, thank you for your service, Sarah.

[B]

Okay, now, the consumer sentiment survey and the consumer expenditure survey, they have their flaws, of course, because, well, they're surveys. So it's someone just asking you about your feelings and about your purchases. So people can say they feel great about the economy right now, but actually in their spending habits, it might not seem like they're actually feeling that good.

[C]

And also, the consumer expenditure survey partly relies on what people like, remember that they spent money on.

[D]

That works pretty well for many consumers. It doesn't work well for all consumers. So at the very high end of the income distribution, consumers may not report all of their spending. Sometimes it's hard to track. You know, you might have bought a yacht, flights on a private jet. A yacht. Yeah, those kinds of things you're probably not going to report. Or you may not be thinking about them quite as much as people who are buying groceries.

[B]

Oh, it's so hard to remember all of your purchases when you're rich.

[C]

Yes. How many $2,000 Hermes throw blankets did we buy? I can't. I can't remember. Who can say?

[B]

They don't even fit in my house anymore.

[C]

Oh, yes, well, you forgot that you bought a bigger house. That's the thing that happened.

[B]

Yes, the house. I forgot about that extra house.

[C]

So listen, the surveys aren't perfect, we acknowledge, but they do clearly show this mismatch, that even though consumer sentiment is declining, consumer spending remains strong.

[B]

When you guys wrote that, you were looking for an explanation for this resilience, why there's this high consumer spending. You're implying there, that there is something unusual about this. Like, how unusual is it?

[D]

The divergence has not been so sharp as it has been since the COVID pandemic. Before COVID you typically saw consumer sentiment reflect consumer spending fairly well. They kind of moved at least in the same direction, if not precisely the same way.

[C]

Yeah, Covid is the one big exception to our spending sentiment friendship. When people were stressing about the economy during COVID there were stimulus checks and people were spending.

[B]

Yeah, but Covid was like a special time. Okay. And right now there are actually a lot of things going on, not just the consumer sentiment stuff, that theoretically you'd expect to slow down overall spending.

[C]

Sure. Interest rates are high. This is, you know, Econ 101. If interest rates are high, that typically puts.

[D]

It's a form of a break on economic activity.

[B]

Yeah. And there's growing inflation still, so things cost more. You.

[D]

Inflation as well is a form of, you know, it creates hardship for consumers.

[C]

There's tariffs, which have made the prices of lots of goods go up, and you would expect tariffs to slow down overall spending.

[D]

So all these different forces can affect consumer behavior. And if you stack these up, you might expect to see, only speaking qualitatively, less strong economic activity when it comes to consumer spending. And that's part of the puzzle as well. So it's not just the consumer sentiment versus consumer spending, but these other forces as well.

[B]

The interest rate, other forces, the tariffs.

[D]

Yes.

[B]

It's all of these things together that are making deer and go like, why is consumer spending so resilient right now?

[C]

Diren did have a hypothesis, and because he's at the Federal Reserve, he also has access to specific, better data.

[D]

What we have are essentially coming from account level data from banks based off credit card swipes or credit card statements. And so these are not. These don't require people to remember how much they spent in the past.

[B]

Yeah, credit card swipes. So after the financial crisis of 2008, the Dodd Frank act required large banks to give the Federal Reserve access to data about credit. Credit cards to understand how much lending banks are doing.

[C]

The credit card data that the Fed has access to covers about 80% of all credit card balances in the economy. And the Fed can see anonymized each cardholder's monthly spending, credit card debt, balance interest charges, and even the income that the person had when they opened their account.

[B]

And now obviously, credit card transactions don't capture all consumer spending. Consumer spending is literally everything that we consumers spend on. So rent, bills, when we Venmo our friend for that bottle service. Those things we usually don't pay for with credit cards, but, you know, cash, debit checks.

[C]

So Deer and was just looking at the credit card chunk of that, but it does capture about half of all spending in the retail space. And when he and a colleague looked at all of this, here is what they found. So in May of this year, total.

[D]

Spending in our data was about, it's about $300 billion in that month.

[B]

That is how much Americans charged to their credit cards just in the month of May. And Deeran published these graphs of credit card spending that sorted by income level that we looked at together.

[D]

So this is saying in a given month how much credit card spending came from households whose income was between zero and $39,000.

[B]

So this was like 26, 27, 26 billion.

[D]

Yeah, exactly correct.

[B]

Okay, so the lowest income bracket would have spent 26-ish billion dollars in any given month in 2025. And then the highest income bracket would have spent, ooh, 175ish billion dollars in any given month. Huge disparity.

[D]

Yes, right. Yes, yes, exactly.

[B]

All right, while it might sound like, yeah, duh, the wealthiest people spend more. Deer and says, think about it like this.

[D]

Of that 300, about 175 billion came from the very highest fifth of the income distribution. So a bit more than half came from the top 1/5.

[C]

The wealthiest 20% of Americans were responsible for over half of that credit card spending. But what's even more significant, Darren says, is the growth rate in spending among those high income households.

[B]

The wealthiest consumers are spending billions and billions and billions, billions and billions more than they as wealthy people used to spend in a month. Deer and says they're spending 86% more than they were 10 years ago, even adjusted for inflation. Meanwhile, the lowest income consumers are spending 50% more than they used to, which Deer and says is a meaningful difference.

[C]

So Diren says the wealthiest Americans are driving the growth in overall spending. They are propping up the economy with their spending. And this is the reason consumer spending looks so good.

[B]

Would it be fair to say that it seems like the people at the top are Keeping the economy strong right now.

[D]

Yeah, I think they're. They're a very significant component of consumer spending right now. That's fair.

[B]

Okay, so it is not that, like inflation and high interest rates and tariffs are all of a sudden not affecting consumer spending. They are affecting consumer spending. It's just that the people at the top are kind of insulated from those things. High interest rates and more expensive goods because of tariffs and inflation. They don't necessarily stop a wealthy person from paying to renovate their kitchen or spending 19 whole dollars 99 cents on a single strawberry imported from Japan. Real rich person. Example.

[C]

What?

[B]

Yep. One berry.

[C]

Do we know how good it was?

[B]

I mean, who cares? It's a strawberry. I'm gonna go out on a limb. It's gonna taste like a strawberry.

[C]

Fair point. Anyway. Okay, look, a few things in addition to this, like, insulation factor have also been going really well for people at the top. So like, this year, their wage growth has been strong. For low income households, though growth has been slow.

[D]

That's an important resource that supports spending paychecks. So that is another factor. And finally, you have changes in wealth. Homes, stocks, these kinds of assets have become more valuable in the last five years, and they're likely to be much more important in supporting consumer spending for households at the top of the income distribution.

[B]

Yeah, people who own homes, their homes have been appreciating in value in, like, wild ways in recent years. And then people who have stocks, the stock market is doing really, really well, and that gives wealthier people the confidence to spend even more generously. You also wrote that you wanted to learn whether cracks may be forming, and if so, where. And so are there cracks forming, and if so, where?

[D]

So to the extent that we might see reasons for vulnerabilities in the economy, we could infer some. For example, if more and more consumer spending is supported by households at the top of the income distribution, then some shock that affects their resources, like a shock to stock markets, may pass through into overall consumer spending more because we're not able to rely on the spending of lower income households who are using their paychecks to support spending.

[C]

And the same would not be true if there was a shock to people in the lower income bracket.

[B]

Well, I mean, if we did have a shock where it was like a bunch of lower income people were to lose their jobs, it seems like in that scenario, yes, those individual people would be worse off and it would be harder for them to pay their bills. But it seems like spending in the economy would still potentially be pretty Strong because the people at the top are the ones driving spending.

[D]

Correct.

[B]

But it would be bad if there was like a stock market shock that made the people at the top unable to spend as much.

[D]

Yes. Yes.

[F]

Okay.

[B]

Okay. So that is a vulnerability. Like we're like. Yes, we're in a vulnerable situation.

[C]

Our economy, you could say, is in a precarious situation.

[B]

You described our economy as a Jenga tower at the moment. Sounds not good, but tell me what you mean.

[F]

So I mean, it's a top heavy Jenga tower.

[C]

That is Peter Atwater, an economics professor at William and Mary, apparently also Jenga expert.

[F]

So all of the economic strength in this economy at the very top. And so our Jenga tower economy is creating an illusion of prosperity and at prosperity for all. And when you think about how small a segment of the population truly is benefiting from this, you end up, I think, deceiving yourself in terms of the strength of the American economy today.

[C]

After the break, just gonna pull this little Jenga piece out here real smoothly. Let's see what happens.

[B]

We're wobbling. We're wobbling. I would not do that. I'd put it back.

[C]

You can't stop playing Jenga, Sarah. That's the rule. Gotta keep going.

[A]

This message comes from Babson College. Ever notice how one idea can change an entire market? At Babson College, graduate students learn to turn bold ideas into real world impact. Whether launching a startup or rethinking business as usual. In Babson's MBA and specialized master's programs, you'll gain the skills and experience to lead change. Ranked number one in entrepreneurship, Babson is shaping leaders who don't just study the economy, they build it more. At Babson Edu Gradschool. This message comes from adp. ADP knows any new technology, any old competitor, any trendy thing, even a trendy thing that everyone knows isn't a great idea, but management just wants us to give it a try for a bit. Can change the world of work. So whether it's a last minute policy change or adding a new company holiday, ADP designs forward thinking solutions to help businesses take on the next anything. ADP always designing for people.

[E]

This message comes from NPR sponsor Odoo. Some describe Odoo like a magic beanstalk because it scales with you and is magically affordable. Odoo. Exactly what a business needs. Sign [e-mail] that's o d o o dot com.

[B]

There is a term for the type of economy that some say we have right now and it is not, sadly Top heavy Jenga Tower. But Peter Atwater, who gave us that great metaphor, did popularize this term too. The economy, Peter says, is K shaped.

[F]

When there was this land grab for letters, people choosing V and U and L, the letter K is what to me made the most sense.

[B]

Wait, what was the land grab for letters? I'm unfamiliar.

[C]

Indeed, it was during the pandemic.

[F]

Oh. So the epidemic had barely hit and economists were predicting how the recovery would take place. And so you had those saying, oh, it's going to be a V shaped recovery. Everybody's going to do well. Others said, no, no, no, we're going to have this long pronounced decline and then it's going to move up. So it'll be like the letter U. Others thought it was hopeless and it was just going to be an L. And I was like, no, it's going.

[B]

To be K. And what? Like, visualize it for me. What is a K shaped economy?

[F]

A K shaped economy is one where white collar workers, investors, those at the top of the economy, the ones that.

[C]

Are the top arm of the K.

[F]

If you will, are moving upward on an escalator. It's just getting better and better and better for them, while for those at the bottom, they're falling further and further behind.

[B]

So the top of the K is like good and getting better, and the bottom of the K is bad and.

[C]

Getting worse, noticeably worse. Peter says, he says that you can see that K shape all over the economy in the numbers you have Delta.

[F]

Airlines saying that next year, for the first time in its history, it will have more revenue from the front of the plane than the back of the plane.

[B]

For the first time ever.

[F]

For the first time ever.

[E]

Dang.

[F]

You know, today we have twice as many car models that cost over $100,000 than cost less than $30,000. Those driving used cars on the highway see that every day. And so the overabundance at the top is incredibly visible and demoralizing.

[B]

Peter says we have a bifurcated economy. Basically. There are two different economic experiences existing simultaneously.

[C]

And companies are focusing on investing in their higher income consumers, like giving them incredible credit card perks, while low income consumers are defaulting on their credit card debt. The average price of a car right now is $50,000, while car loan defaults and repossessions are on the rise.

[B]

And listen, inequality, a wealth gap, these are nothing new. But right now, Peter says, there's that added layer of a really great performing stock market.

[F]

You know, it is often said that the markets are not the economy, but at the top of our economy today, the markets are the economy.

[C]

Yeah. And when it comes to the strength or health of the economy right now, Peter says we're actually incredibly dependent on financial markets continuing to perform well. And really, the recent stock market growth is being driven by just a few companies known as the Magnificent Seven.

[B]

It's Amazon, it's Apple, Tesla, Meta, the giant tech companies that all have ties to AI.

[F]

And that's a very fragile condition for financial markets. There is overconfidence in investors, belief that markets only go up and that they will forever be rewarded as a result.

[B]

But they believe this because it's been a long time where it's been going up.

[F]

It has been proven true. And we know when that happens, those patterns tend to change unexpectedly and violently.

[B]

Basically, if consumer spending right now is being driven by the rich, and the rich are spending because they feel extra rich and confident because the stock market is doing great, then Peter says a shock to the stock market is all it could take for the Jenga Tower to fall over.

[C]

Special thanks to johnny05 is alive who left us a rating and a review on Apple podcasts. Quote, just heard the amazing Planet Money story on people working legit jobs from prison in Maine and felt the need to write a review. Always interesting stuff on planet money. 100% recommended.

[B]

Aw, yeah. Thanks so much, Johnny.

[C]

Sarah, you did that show?

[B]

Yeah, with a public radio reporter in me. Go.

[C]

Public radio ratings and reviews really, really help other people find this show. So if you like what we do, please, please help us by leaving a rating and review on your podcast app.

[B]

This episode was produced by James Need. It was edited by Meg Kramer and fact checked by Sierra Juarez. It was engineered by Debbie Daughtry and Kwesi Lee. Alex Goldmark is Planet Money's executive producer. And we wanted to give a special thanks to economist Thomas Ferguson. I'm Sarah Gonzalez.

[C]

And I'm Kenny Malone. This is npr. Thanks for listening.