Economists say Americans should be spending less by now, but the latest data on consumer spending tells an entirely different story.

Household spending—the primary driver of the U.S. economy—rose by 0.4% in August, according to the Department of Commerce. That might not seem like much, but it was 5.8% higher than a year earlier when the economy was supposedly in better shape.

In August, households spent more on life essentials—housing, utilities, transportation, and healthcare—but also splurged on experiences. That’s usually a tell-tale sign that consumers are in pretty good shape financially.

But a closer look at the data reveals something both alarming and inspiring at the same time.

Splurging on what they can afford

Spending on “recreation services”—a category that includes memberships, clubs, theaters, sports, and gambling—increased by 4.9% in August. That was higher than clothing and footwear, food and beverages, and durable goods.

While Americans have never been shy about recreational spending, experts say they’re putting short-term needs above long-term goals. With homeownership out of reach for many, consumers are spending on things they can actually afford, such as “lifetime experiences” they enjoy, instead of saving for a down payment on a home.

“It’s not a regret-filled, spur-of-the-moment decision,” Wells Fargo adviser Michael Liersch told The Wall Street Journal. “It’s the opposite of that, where I would regret not having done it.”

Although many economists are warning about a possible recession, there’s no sign that the travel and recreation industries are experiencing a downturn.

Delta Airlines, for example, reported record revenue in the second quarter of the year, and Ticketmaster sold more than 295 million tickets in the first half of 2023—an 18% increase from the previous year.

Similarly, Major League Baseball announced on Oct. 2 that its attendance figures had surged 9.1% in 2023 to an average of 29,295 fans per gamethe biggest number since 1993.

All that spending is good for the economy, but it also comes at a high cost.

Pandemic savings depleted

For consumers who remained employed during Covid lockdowns, the pandemic provided an opportunity to stash away extra savings. Those “excess savings” are now gone.

According to the San Francisco Fed, U.S. households depleted their $2.1 trillion in excess Covid savings last quarter. All that spending kept the economy afloat as the Fed cranked up interest rates and the labor market started to run out of new jobs, but that could change very soon.

According to Fitch Ratings, one of the top three credit rating agencies, consumer spending will likely slow ahead of the holiday season. Fitch blamed the impending slowdown on the depletion of Covid savings, slowing income growth, and rising debt payments.

“Debt service is expected to trend higher in the coming quarters as student loan payments resume and higher financing costs take hold for much longer,” said Olu Sonola, head of U.S. regional economics at Fitch.

Sonola’s outlook mirrors the “quadruple shock” that other analysts have warned will weigh down consumer spending this quarter. Economists say the after-effects will spill into 2024, with economic growth expected to slow significantly.