EconomyMay 1, 2024
Consumers Begin Scaling Back on Spending After Strong Years for US Economy — With the Fate of Earnings and the Economy At Stake
Monetary Policy
Noah Weidner
Discover
Amidst the pandemic, the US staged a remarkable recovery, quickly becoming the world’s strongest economy. However, even the US is susceptible to the laws of physics: what goes up must come down.
Holding on for dear life: After remaining hardy in the face of stagflation, some of America’s largest companies are warning investors that consumers are tightening their economic belts — and finally pulling back on spending after a banner few years for the US economy. This earnings season, companies have reported weaker results — and issued subdued forecasts for the coming quarter. This has reignited recession angsts on Wall Street — leading to a 3.6% decline in the S&P 500 this month.
Weaker consumer spending not only impacts corporations but also the Federal Reserve — which has already had to digest weaker-than-expected GDP growth and an acceleration in high-profile layoffs across some sectors. And making matters worse, American consumer confidence fell to its lowest point since Jul. 2022 (back then, inflation was over 8%, the worst in four decades). Still, the Fed isn’t blinking…
Renewed recession fears: Some analysts, like QI Research’s Danielle DiMartino Booth, believe the US economy is already showing signs of a recession — but with positive GDP growth in the first quarter and expected strength in Q2, there’s no technical recession in sight. Nonetheless, a long-awaited pullback in high-flying US equities could be next if earnings continue to disappoint. Eventually, the pundits and analysts may see the recession they’ve been incorrectly predicting for the last three years.
