There are some signs that the strong U.S. consumer is finally slowing down.
Macquarie strategist Thierry Wizman expects the U.S. economy to slip into a consumer-led slowdown.
He said a recession could occur between now and the end of the first quarter of 2024.
U.S. consumers are finally showing signs of slowing down as their savings are depleted, and there are some warning signs that the economy could soon be heading into a spending recession.
Macquarie Global strategist Thierry Wizman expects the U.S. economy to slip into a consumer-led slowdown between now and the end of the first quarter of 2024. He said a sharp pullback in consumer spending could force GDP growth to stall. Insiders say it has pushed the overall economy to the brink of recession.
Weitzman’s pessimistic predictions are contrary to reality other commentators sayconsumers continued to spend wildly in the third quarter of this year. retail salesSeptember’s gain was 0.7%, more than double economists’ expectations.
But Weitzman said elastic spending is its own problem: Spending is so strong that it is bound to lurch in the other direction as savings dry up and America’s financial conditions change.
“There’s a reason why the third quarter was so strong. Through all the hardships revenge trip … tour,” Weitzman said. “The problem, of course, is that it’s usually followed by a hangover. “
“Like all hangovers, this one occurs shortly after overeating,” he added in a report this week.
The economy is now flashing some warning signs that U.S. consumers are losing steam. Here are five weak signs that spending is about to decline.
1. Credit card delinquency rates rise
The share of new delinquent credit cards rose to 2% last quarter, about double what was recorded in the first quarter of 2021. At the same time, the number of Americans who are seriously late on paying their credit card balances (by at least 90 days) rose to nearly 2%. That increased 6% last quarter, according to the New York Fed’s latest Household Debt and Credit Report.
Credit card delinquency rates also rose significantly for those already saddled with car debt and student debt, the report added. That’s a sign of rising financial stress, which could lead people to cut back on spending, Weitzman said.
2. Americans are saving less
The personal savings rate fell further last month. Americans saved an average of 3.4% of their personal disposable income in September, down from 4% in August, according to the Bureau of Economic Analysis. That’s well below pre-pandemic savings rates, when Americans were saving about 7% of their disposable personal income.
“It’s actually very, very low compared to historical standards,” Weitzman said of the current savings rate. “So it has to adjust at some point.”
Consumers have also used most of their savings due to the epidemic. Excess savings may have been depleted by the end of last quarterAccording to a study by the Federal Reserve Bank of San Francisco.
3. Consumer confidence has declined for three consecutive months
According to the Conference Board, the consumer confidence index fell to 102.6 in October from 104.3 the previous month. This marked the third consecutive month that consumer sentiment has deteriorated, based on factors including inflation, stock prices and interest rates. rates.
Meanwhile, the Conference Board’s expectations index, which reflects consumers’ short-term economic outlook, slipped to 75.6 in October, still just below the key 80 threshold that traditionally signals a recession within the next 12 months.
“Consumer concerns about a coming recession remain elevated, consistent with our expectations for a brief and mild economic contraction in the first half of 2024,” The Conference Board said in a statement.
4. Consumers are not planning to splurge this holiday season
Americans look less likely to splurge, even heading into the holidays. A McKinsey survey of 1,000 U.S. consumers found that only 35% said they planned to spend big money this year, down from the 39% who said they were willing to splurge ahead of the 2022 holidays.
Another survey from Morgan Stanley found that 69% of people wait for a discount from a retailer before starting to shop. Strategists say consumers expect discounts of around 30% on average.
5. Retailers are recruiting fewer people ahead of the holidays
Data from the U.S. Bureau of Labor Statistics showed that holiday hiring among retailers dropped sharply to 135,000, the lowest level in five years.
Torsten Slok, chief economist at Apollo, said in a report: “Holiday season hiring typically occurs in October, and the latest employment report adds up the new jobs created in the retail industry during the holiday season as defined by the U.S. Bureau of Labor Statistics, showing that retailers Expect a soft holiday quarter.” Watch out Tuesday.
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