The lower-end consumer is substituting and becoming price sensitive — that is not demand destruction, and it is a mistake to confuse the two.
Josh distinguishes between consumers trading down to discount stores and private labels (substitution) versus actual demand destruction, noting that aggregate consumption remains positive and the data shows spending continuing. ✦ AI generated
Josh · The Compound · 2026-07-20 · original ↗
starts at this moment · 45:39
Lower income consumers are adapting rather than disappearing. So they're increasing spending at discount apparel stores. They're trading down private labels, discount merchandise. We all understand this, but the spending is not stopping. It's continuing. So this is substitution and price sensitivity, not demand destruction. And last but not least, aggregate consumption remains positive. June 2026 core retail sales rose .5% following an upwardly revised .8% the prior month.
verbatim transcript · starts at 45:39
45:46survey that they were doing okay or living comfortably. That's up from last year. 63% said they could cover a $400 emergency. Um, five, lower income consumers are adapting rather than disappearing. So, they're increasing spending at discount apparel stores. um they're trading down private labels, discount merchandise. We all understand this, but the spending is not stopping. It's continuing. So, this is substitution and price sensitivity, not demand destruction.
46:21And last but not least, aggregate consumption remains positive. June 2026 core retail sales rose.5% following an upwardly revised8% the prior month. It's mostly higher income consumers shifting that up, but the overall data does not show the bottom half falling out. Are we saying it's good to be on the bottom of the K? No, of course not. Are we saying that there isn't room for improvement in these people's lives? No, of course
46:51we're not saying that. But it is not true that this bottom income consumer is drowning or dying or disappearing from the stores or not paying their bills. It's just it's not in the data. It's not what's happening right now. What are your thoughts? >> I've been saying this for a long time and it's probably deeply unpopular for people with money to say that things aren't as bad as the people are making
47:18it out to be. >> You can't you can't win. Um, so yeah, to echo what Josh said, like obviously, you know, it sounds insensitive to say this, but we're looking at the data and we're listening to the people with the data inside the banks and they're all saying the same thing. They're all saying the same thing. This guy went viral, a PNC economist. They have the data. They