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.