America's post-pandemic spending spree may be coming to an end.

According to Wall Street strategists, the combination of weaker consumer spending, record household debt, and massive retail discounts suggests that Americans are beginning to tighten their belts.

“Covid showed all of us that life doesn’t go on forever,” said Sameer Samana, a senior global market strategist at the Wells Fargo Investment Institute.

That feeling encouraged many Americans to splurge on revenge travel, rack up credit card debt, and delay retirement planning.

Now, after years of elevated inflation, dwindling savings, and rising unemployment, consumers aren’t nearly as confident in the economy as they once were.

“There is an element of ‘how long can I live in this PTSD post-Covid environment?’” Samana said. “At some point, you do have to figure out what the new normal looks like [...] There’s this sense of reversion to the mean.”

This uncertainty is evident in the latest economic data, which showed that retail sales unexpectedly flat-lined in April, missing the 0.4% increase economists expected. Sales were also revised down in March.

Meanwhile, the Bureau of Economic Analysis’ already dismal Q1 GDP figures were revised down to show weaker consumer spending. Consumption, which drives more than two-thirds of GDP, grew 2% in the first quarter, down from the previous estimate of 2.5%.

Economists say this is a sign of things to come.

Difficult trade-offs

Rising costs and anxiety about personal finances are forcing Americans to make uncomfortable trade-offs, which is reducing their appetite for discretionary spending.

“Elevated interest rates, an uptick in energy costs, and persistent discomfort with price levels continue to push consumers to make trade-offs with budgeting, with goods categories increasingly overlooked in favor of services spending,” said Kayla Bruun, a senior economist at Morning Consult.

These factors have led to a dip in U.S. consumer confidence, which is often a leading indicator of future spending trends.

Consumer research by McKinsey found that, as of the second quarter, Americans said they had noticed “price increases on essential items and services,” and that they expect to boost their spending in the next three months.

Meanwhile, retail companies are warning their investors to expect a more cautious consumer, which will likely result in lower sales in the coming quarters.

“Our customers continue to be pressured by a number of economic factors, including high interest rates and inflation,” said Kohl’s CEO Thomas Kingsbury. “Our middle-income customer continues to be impacted.”

In fact, Home Depot, Target, and Best Buy have all suffered due to declining sales of discretionary goods.