Buy Now or Pay More Later: Consumer Sentiment Drives Spending on Big-Ticket Items

Now’s the time to buy — because everything might get more expensive, sooner rather than later. To that end, the latest edition of the University of Michigan’s Consumer Sentiment Index shows consumers are positive about near-term current economic conditions. At the same time, they’re eyeing near-term inflation prospects, which are creeping up.

“A surge in buying conditions for durables led Current Economic Conditions to soar more than 20%. Rather than a sign of strength, this rise in durables was primarily due to a perception that purchasing durables now would enable buyers to avoid future price increases,” noted the comments from Surveys of Consumers Director Joanne Hsu.

In part, those anticipated price increases can be traced to concerns about the impact of possible tariffs to be imposed by the incoming Trump administration. The university’s report noted that there is a divergence between expectations from Democrats (where assessment of overall conditions are declining) and Republicans (where expectations are climbing).

The headline number detailed that consumer sentiment index rose from 71.8 points in November to 74 points in this preliminary December data. The consensus had expected a 72 reading, and the latest tally indicates the highest level seen in seven months.

The Inflation Expectations

Year-ahead inflation expectations rose from 2.6% to 2.9%, the highest level since July, and at the top end of the 2.3% to 3% range that has been seen through the past few years.

Long-term inflation expectations fell slightly, from 3.2% to 3.1%, matching consensus.

In recent coverage tied to durable goods — in this case, autos — PYMNTS took note of already high sticker prices and the high cost of debt.

The most recent retail sales data released by the government, for October, may serve as a harbinger for this pulling forward of larger ticket items. Spending on automobiles and parts surged by 1.6% while spending on electronics and appliances gained 2.3%. Spending on building materials and garden-related items gathered 0.5% as measured against September’s levels.

There may have been shifts in spending to make those purchases possible, given the fact that in discretionary spending, categories that slipped month over month were sporting goods, hobby, musical instrument and bookstores, as well as health and personal care — by 1.1% each. Spending on apparel was down by 0.2%

Separately, in terms of paying for it all, PYMNTS Intelligence data on the ways in which consumers are using credit and different payment options show that through the past year, 54% of more than 2,600 respondents used some type of split-payment option in the last year, including 65% of younger consumers such as Gen Z shoppers. Among all plan types, general-purpose card-linked installment plans were the most common, at 40%, followed by buy now, pay later (BNPL) plans  at 33%. Roughly 37% of shoppers used BNPL to buy furniture, and nearly 30% did so in order to buy appliances. Just about 10% of the individuals we surveyed said they’d used the paying-over-time options to buy new or used autos.