The Consumer Sentiment vs. Consumer Spending Puzzle

Planet Money discusses the unusual divergence between low consumer sentiment and strong consumer spending in the US economy. Typically, these two indicators move in tandem, but recently, spending has remained high despite widespread economic pessimism. The hosts, Sarah Gonzalez and Kenny Malone, along with economist Dearin Patki, explore potential explanations, focusing on how high-income households are driving the majority of consumer spending growth, effectively insulating the economy from broader anxieties related to inflation, interest rates, and tariffs. Economist Peter Atwater describes the economy as K-shaped, with the wealthy experiencing significant gains while lower-income individuals fall behind, creating a fragile, top-heavy economic structure dependent on the continued success of financial markets.