As the US economy continues to grow, older Americans are playing a crucial role in driving economic growth by investing in their homes and stocks. This has led to an increase in their financial security, giving them the confidence to spend more on non-essential items like entertainment and travel. Despite high mortgage rates, they are not deterred from spending because they are not borrowing money to purchase a house.
This increase in spending, known as the “wealth effect,” is fueled by rising home and stock prices. American households have seen a rise in their assets, creating more disposable income that they can use to fund their lifestyle choices. This type of spending is contributing significantly to why the economy has not slowed down as anticipated.
However, with this increased spending comes sticky inflation caused by rising consumer demand for goods and services. The Federal Reserve is reconsidering its plans due to these challenges, as Professor Lonnie Golden notes that people’s spending on dining out, travel, healthcare, and pharmaceuticals is likely to continue influencing inflation rates. Overall, older Americans’ contributions to the US economy through their investments and increased spending are vital for continued economic growth.
