Consumers Carry the Economy
When clients asked if we’re heading for a recession last year, we said that it depends on the consumer. Well, you know the 2022 story by now. Consumers spent in spite of higher prices and supply shortages, and kept the economy afloat.
Now, 364 days later, interest rates top 5%, economic growth has slowed to 1.3%, warning lights are flashing across our recession dashboard – and clients are asking again. Believe it or not, our answer remains the same: It depends on the consumer.
On the downside, inflation is slowing but still running higher than the Federal Reserve would like, households continue to burn through excess pandemic savings, and consumer sentiment dipped a little recently.
That said, the consumer might have something left in tank. The jobs market remains resilient, households still hold a nice cushion ($500 billion!) of excess savings, and consumer spending is up.
Believe us, we see the flashing lights and believe it’s inevitable the U.S. economy will enter a recession at some point – markets go through cycles, after all. But for now, the consumer continues to show resilience.