What a difference the year makes.

Consulting giant McKinsey & Co. The results of a consumer survey last fall carried this headline: “Shoppers Feel Expense and Socialize.” McKinsey said half of those who reported an annual earnings of at least $100,000 were “holiday or excited about the holidays.” It turned out to be a good call. Despite the pandemic and its many complications, the final census of the US Census Bureau showed that annual retail sales grew in 2021 by a whopping 18 percent during 2020.

The headline this year? How about, “Shoppers are exploited, exhausted and pessimistic?” I am not sure that the statement is accurate either.

The main villain is inflation, but the problem is much deeper than the price of gas or groceries. Interest rates are rising. This means that the cost of credit card debt is rising and, as the Federal Reserve recently promised, is expected to continue rising as the central bank works to prevent inflation from worsening.

A year ago, consumers had good reason to feel “spent.” Among other factors, many used some of the influx of government stimulus money released during the year to reduce debt. At the same time, real estate prices began their runaway run. The median sale price of homes sold in the US has increased by more than a third in just 12 months. Consumers were flocking to cash, credit, and equity.

A year later, credit card debt ballooned, posting the largest year-over-year percentage increase in more than two decades. Revolving credit increased in July alone an annual rate of 11.6 per cent.

So, consumers have been spending money they don’t have and now it is costing them a lot. A year ago, the average adjustable credit card rate charged about 15%. Today, the average adjustable rate for all new card offerings is over 21%, with some bank cards overlooking 25%. These rates are guaranteed to keep rising as the Federal Reserve raises the base rate on which credit card rates are based.

Meanwhile, rising mortgage rates are stifling real estate wealth. Home prices are being lowered, home equity is diminishing, and those who have traded, invested in real estate or bought second homes are discovering what it means to be land poor.

Perhaps the most telling statistics about the state of the consumer are the federal statistics personal savings rate Tracker that calculates personal savings as a percentage of personal disposable income. This action peaked in May 2020 as federal stimulus payments flooded the economy with cash.

A year ago, the savings rate was 10.5%, the highest in three decades. A year later, in the most recent report for July, it had fallen to 5%, the lowest rate since the Great Crash/Mortgage Crisis of 2008.

What does all this data mean for consumer status and future spending?

First, cars and homes have become too expensive for many, so this part of the economy will continue to slow as intended by the Fed's rate adjustments. If the Fed can control inflation, especially food and gas prices, there may be light at the end of the tunnel. If this is not the case and consumers have less money to spend, they are likely to cut back on spending or borrowing.

Which brings us to the final consumer debt factor to consider. If the employment numbers remain strong, and people can continue to make their credit card payments and keep a reasonable percentage of debt, we may all be in a good position.

The concern is that there is a lot of "if" in that data.

It is best for both business and consumers to continue to monitor all metrics of what is currently going on and what has happened in the economy, but equally important is to try to anticipate what might happen next.