Wealthy Americans are starting to spend more carefully

Americans with deep pockets have played a growing role in powering the US economy with their spending. But their days of splurging like there’s no tomorrow might be coming to an end.

A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link. Americans with deep pockets have played a growing role in powering the US economy with their spending. But their days of splurging like there’s no tomorrow might be coming to an end. US household wealth surged in recent years, despite the scourge of high inflation and the Federal Reserve’s bitter medicine of elevated borrowing costs to rein in price increases. A robust stock market coupled with rising home values have boosted Americans’ wealth from 2019 through 2022, according to a Federal Reserve report on household finances. That increase is known as “the wealth effect,” and it has continued to shore up Americans’ finances as stocks shatter records and high bond yields beef up savings accounts. Plus, Americans who locked in a low mortgage rate before the Fed began to hike interest rates in 2022 and have decided to stay put have been shielded from the effects of high mortgage rates. Put together, that means many consumers have not only been able to withstand inflation, to a degree, but they’ve also been able to spend on travel, concerts and big-ticket items. US economic growth accelerated at a brisk pace in 2023, largely thanks to the US consumer.