Strong consumer spending remains crucial for the U.S. economy, but a tipping point may be on the horizon.
The constant hum of the American consumer machine is displaying a degree of resilience that is puzzling economists.
High borrowing costs, a product of the Federal Reserve’s interest rate hikes, haven’t deterred American consumers from robust spending. Yet as seasons transition, there’s an underlying concern about the sustainability of the current spending momentum.
United States Census Bureau data released earlier this month showed a promising trend—retail sales in September grew by an encouraging 0.7 percent, representing the sixth consecutive month of gains. That trajectory defines the resilience of American consumers, even in the face of rising inflation and steep interest rates.
However, that data isn’t inflation-adjusted, which increased by 0.4 percent in September.
So while consumers appear confident on the surface, underlying currents suggest possible shifts. And, despite current buoyancy in spending, economists are ringing alarm bells.
Households are depleting their savings, and the cushion provided by pandemic-era stimulus checks and reduced lockdown expenses is gone for some and diminishing quickly for others.
