5 Signs the Resilient US Consumer May Be Starting to Buckle

• There are some signs that America’s consumer boom may finally be slowing.
• Macquarie strategist Thierry Wismann expects the US economy to enter a consumer-driven slowdown.
• He said a recession could occur between now and the end of the first quarter of 2024.

U.S. consumers are depleting their savings and finally showing signs of slowing, and there are several warning signs that the economy could soon slip into a consumer recession.

Macquarie Global strategist Thierry Wismann expects the US economy to enter a consumer-driven slowdown between now and the end of the first quarter of 2024. He said a significant setback in consumer spending could bring GDP growth to a grinding halt. Insiders push the entire economy into recessionary territory.

What is Wisman’s optimistic outlook against? Other commentators also saidThat’s because consumers have continued to spend for the third consecutive quarter of this year. retail salesrose 0.7% in September, more than double what economists expected.

But the resilience of spending itself is a problem. Spending has been so strong that as savings are depleted and Americans’ financial situations change, spending is sure to whip in a different direction, Wisman said.

“There was a reason why the third quarter was so strong. We got through all the revenge trips…concert tours,” Wisman said. “The problem, of course, is that there’s often a hangover afterwards.”

“Like other hangovers, this one occurs soon after overeating,” he added in a note this week.

The economy is currently flashing some warning signs that U.S. consumers are losing momentum. Here are five signs of weakness that indicate a consumer recession is on the horizon.

1. Credit card delinquencies are increasing.

The percentage of credit card holders who were newly delinquent in the last quarter rose to 2%, nearly double the percentage recorded in the first quarter of 2021. Meanwhile, the number of Americans who are at least 90 days behind in paying their credit card balances has increased to nearly 2%. Last quarter, it was 6%, according to the New York Fed’s latest Household Debt and Credit Report.

Credit card delinquencies have also skyrocketed, especially among people who already have auto or student loan debt, the report added. This is a sign of growing financial stress, Wisman said, and people are likely to cut back on spending.

2. Americans are saving less.

Federal Reserve System/Bureau of Economic Analysis

Personal savings rates 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 U.S. Bureau of Economic Analysis. This is well below pre-pandemic savings rates, when Americans hid about 7% of their disposable personal income.

“This is actually very low compared to historical standards,” Wisman said of the current savings rate. “So at some point there will have to be adjustments.”

Consumers have also withdrawn much of their savings due to the pandemic. According to a study by the San Francisco Fed, excess savings likely ran out at the end of last quarter.

3. Consumer confidence declines for third consecutive month

According to the Conference Board, consumer confidence index was 102.6 in October, down from 104.3 the previous month. This is the third consecutive month that consumer attitudes have worsened based on factors such as inflation, stock prices and interest rates.

Meanwhile, the Conference Board’s Expectations Index, which reflects consumers’ short-term economic outlook, fell to 75.6 in October. This remains just below 80, a key benchmark that has traditionally signaled a recession within the next 12 months.

“Consumer anxiety about an impending recession remains elevated, consistent with a short and shallow economic contraction expected in the first half of 2024,” the Conference Board said in a statement.

4. Consumers aren’t looking to splurge this holiday season

Americans appear to be less likely to splurge during the holiday season. According to a McKinsey survey of 1,000 U.S. consumers, only 35% said they planned to spend a lot this year, while only 35% said they planned to splurge for the 2022 holiday season. This was lower than 39% of those who did.

Another study from Morgan Stanley found that 69% of people wait for a retailer to offer a discount before they start shopping. On average, consumers are looking for discounts of about 30%, strategists say.

5. Retailers are hiring less ahead of the holiday season

Holiday employment at retailers fell to 135,000, the lowest level in nearly five years, according to data from the Bureau of Labor Statistics.

“Holiday hiring typically takes place in October, and in the latest employment report, the total number of new jobs created in the retail sector during the holiday season, as defined by the BLS, shows that retailers “We can see that they are expecting a slump during the holiday season.” Tuesday’s memo.