Despite many predictions of an impending recession, the U.S. economy continues to show resilience. One of the main pillars of this stability is a strong job market that maintains consumer confidence and spending. However, certain non-traditional indicators are currently causing concern among economists. These subtle signals suggest a potential spike in inflation and the possibility of a recession.
Experts like Raymond James Chief Investment Officer Larry Adam, in particular, see this undercurrent as a red flag. Adam predicts a mild recession next year, perhaps within the next nine months. Such developments could significantly undermine the financial stability of consumers and, in turn, the broader economic situation. In his interview with Business Insider Africa, Adam highlighted three red flags that deserve attention.
consumer challenges
Post-pandemic consumer happiness appears to be on the decline. Skyrocketing student loan repayments, skyrocketing borrowing costs and dwindling savings are starting to strain household budgets. Additionally, top financial executives like Bank of America’s Brian Moynihan are evoking a slower, more static economic landscape characterized by low inflation and minimal growth that prevailed before the pandemic. , is observing a resurgence in cautious consumer spending patterns.
trend of debt increases Among Americans, there are indications that the era of unrestrained consumer spending may be coming to an end. This change is especially noticeable in his 2023 year, which is marked by a significant increase in personal credit card debt. The Federal Reserve’s second quarter report shows an alarming increase in credit card balances, with credit card balances increasing by $45 billion, bringing total debt to a staggering $1.03 trillion.
Further data from TransUnion supports this trend, showing that average debt per consumer increased from $5,010 in the first quarter of 2022 to $5,733 in the same period in 2023.
Burden of expensive loans
Economic constraints are not limited to consumers. The business world is also feeling the pinch. Rising borrowing costs mean higher prices for car loans and mortgages, and many homeowners are looking to adjustable-rate mortgages as a solution.
core logic revealed that as of April 2023, adjustable rate mortgages (ARMs) account for a significant portion of the mortgage market. Specifically, ARMs accounted for 18.6% of traditional single-family mortgage originations, a fourfold increase since their lowest point in January 2021. This situation is forcing companies to reconsider future investments.
Data from various regional Fed surveys paint a grim picture, Adams said. Business investment is shrinking, the previously strong real estate market is showing signs of cooling down, and construction companies are becoming more cautious.
A wide and growing list of economic threats
Zooming out, Adam points out that the macroeconomic picture is not rosy either. Concerns range from rising fuel prices to rising geopolitical tensions, particularly in the Middle East. As the Conference Board’s Expectations Index shows, declining consumer confidence has historically been an early warning sign of an economic downturn. The cumulative economic impact could be severe, especially as the traditionally vibrant holiday season approaches, due to the potential for additional pressures such as ongoing labor disputes and an impending government shutdown. Adam warns that there is.
New rules on the horizon
We are now at a strange economic crossroads.usually when Bond yields reverse Recessions hit, as they have recently. Despite the volatility, the economy remains resilient and defies traditional recession indicators. While a strong job market has been the MVP and is keeping things afloat, the overall turmoil of rising debt and unstable investments cannot be ignored.
Experts like Larry Adam advise caution based on the red flags on this journey, suggesting a mild recession could be just around the corner.
Here’s the kicker. If we ignore the traditional signs of doom and the economy continues to do well without collapsing, we may be witnessing a completely game-changing event. This could be the dawn of a new strategy for the global economy, where old rules no longer apply and resilience dominates traditional economic indicators.
Amaka Chukwuma is a freelance content writer with a bachelor’s degree in linguistics. As a result of her insatiable curiosity, she has written in a variety of B2C and B2B niches. However, her favorite subjects are in the fields of finance, health, and technology. In the past she has written for publications such as Buttonwood Tree and FinanceBuzz, and currently she writes for Wealth of Geeks.
