• by Sarah Mahoney  @mahoney_sarah, April 28, 2023

Consumer spending is holding up, despite economic warning bells. New research from Deloitte and McKinsey highlights that whatever consumers think about the economy, they’re feeling relatively upbeat about their personal finances.

Deloitte’s findings explore the splurge-thinking many attribute to the Lipstick Index -- the idea that in tough times, small pleasures matter more. Except these researchers think it might be better named the Bourbon Barometer, with men 40% more likely than women to indulge themselves.

Deloitte reports that three out of four global consumers splurged on a purchase in the past month, even though only 42% felt they could afford it.

“In the U.S., our survey data indicates that the daily grind of dealing with the economic situation may be causing people to purchase mainly for stress relief,” says Lupine Skelly, retail, wholesale and distribution research leader for Deloitte. “Consumers said they were making splurge purchases driven by the need to find comfort, relax, and focus on wellness. But consumers were also looking for ways to justify these purchases, noting the products they chose were long-lasting or practical.”

Deloitte’s research spanned six months and 23 countries, collecting more than 150,000 descriptions of splurge purchases.

Food and beverages are by far the preferred treats. Men are the most likely to indulge and outspend women by 60% -- a stat that could also link to the 13% jump in volume sales of premium spirits last year.

Skelly says indulging is especially important in the high-income segment, with 81% of those respondents having splurged.

Deloitte also detects an intriguing shift in apparel purchases. When spending less than $100, people are apt to call clothing purchases required additions to a wardrobe. For items that cost more than $100, however, they’re more likely to talk about style and self-expression, not practicality.

Those findings mesh with McKinsey’s new report, which also finds contradictory behavior. On the one hand, people say they are worried about inflation and layoffs. Many are trading down to cheaper brands. Conversely, they are optimistic about their finances and happy to splurge.

Based on its latest consumer pulse survey of nearly 4,000 U.S. adults, the findings reveal that 27% more people are optimistic than last summer. And Gen Z, the group most worried about employment, is also the most upbeat, with 46% saying they think the economy will bounce back in the next few months.

About 80% of the sample say they sometimes trade down to save money, up from 74% in the last survey. Among Gen Z, that rises to 88%, yet 64% also say they’re indulging themselves, especially in fashion, groceries and restaurants.

Overall, McKinsey finds the strongest “splurge” categories are travel, cosmetics and sports apparel.