Consumer spending in the United States continues to defy forecasts, expanding at a rate that is confounding economists — and foiling policy makers who hoped rising interest rates would temper demand. Instead of pulling back, households are continuing to pay up for travel, dining out, streaming services, health products and digital subscriptions — a dynamic that calls into question the durability of economic growth in early 2026.
So why is spending holding up when borrowing costs are close to decade highs?
The answer is far from straightforward, yet it does illuminate critical changes in the ways Americans manage money, debt and priorities.
The labor market is the first force behind strong spending. The job market The overall job market continues to be historically tight, even with layoffs in specialized sectors. Unemployment is low, wages are growing and millions of Americans have moved in hybrid and remote positions there were higher paying. Regular paychecks and modestly higher income enable households to keep spending even as credit becomes more expensive.
A contributing factor is perhaps the growth of “emotional spending” after years of hunkering down financially. A number of studies have found that consumers are more interested in spending on experiences — travel, entertainment — than they are in building traditional savings accounts. Having lived through the pandemic era of restrictions, world conflict anxiety and inflation fatigue, spending has become a psychological outlet as much as an economic one.
And a third is the rise of buy-now-pay-later (BNPL) services. On platforms like Affirm, Klarna and Afterpay, consumers can split the cost of purchases into small parts that are relatively inexpensive up front. BNPL has exploded so quickly that it now represents billions of dollars in retail purchases each quarter, allowing those who have felt that credit cards are too costly to buy more.
There’s also a structural reason for resilient spending: household savings built up during stimulus years haven’t entirely gone away. And even as the pinch in rents and utilities tightens on middle-income families, many higher-income households still have savings buffers — which they are using. This skews spending data upward.
Meanwhile, credit card debt is growing — but not in a way that suggests imminent disaster. Consumers are aggressively borrowing on credit, but delinquency rates have risen and still manageable for now. It enables the spending cycle to keep going, although analysts caution that it could prove to be a problem if interest rates remain elevated for an extended period.
Finally, even inflation itself has a tricky role. Even when people buy the same items, they are paying more — so that total spending figure looks stronger. “Growth” is in many instances nothing but higher prices.
What does all this mean for the economy?
It means households are resilient, and yet they’re vulnerable too. From there, strong spending bolsters economic growth — but at the same time masks risks beneath the surface: rising debt, faltering savings, and reliance on installment-based purchasing. The momentum could quickly wane, however, if the labor market were to cool or borrowing costs were to rise further.
But for now, consumers are keeping the… economy alive — if they’re stretching themselves a little more than in the past.
