U.S. consumer spending is set to fall for the first time since the pandemic, investors say – and Treasury Secretary Janet Yellen says she feels “very good” about staving off a recession
- Consumers will reduce spending in early 2024, according to a Bloomberg survey
- That would reduce inflation but could trigger a recession
- Treasury Secretary Janet Yellen says she is confident there will be a “soft landing.”
U.S. consumers will cut spending in early 2024 for the first time since the pandemic as they grapple with looming financial pressures, according to a new survey.
So far, Americans have defied analysts’ expectations of a recession by maintaining heavy spending to stimulate the economy. Consumers splurged on record-breaking blockbuster films and concert tours this summer, including Taylor Swift’s Eras Tour and Margot Robbie’s Barbie.
But experts say this may be coming to an end.
Around 56 percent of the 526 investors surveyed Bloomberg said consumption will most likely decline in the first quarter of 2024.
Meanwhile, 21 percent said the turning point could come sooner, in the fourth quarter of 2023, and the rest believed spending would “remain positive for the foreseeable future.”
About 56 percent of 526 respondents to a recent Bloomberg survey said consumption would most likely decline in the first quarter of 2024
Consumers splurged on record-breaking blockbuster films and concert tours this summer, including Taylor Swift’s Eras Tour and Margot Robbie’s Barbie
Barbie has grossed more than $1 billion at the box office, while Swift’s Eras Tour may have contributed around $5 billion to local economies across the United States.
“The big question is: Is this level of consumption sustainable?” noted Anna Wong, chief U.S. economist at Bloomberg Economics, who expects a recession to begin by the end of the year. “It’s not sustainable because it’s driven by these unique factors.”
That prediction comes as Treasury Secretary Janet Yellen said over the weekend she was confident inflation would fall without plunging the U.S. into a damaging recession.
“I’m very happy with that prediction,” she told Bloomberg on Sunday when asked about her previous hopes for a soft landing for the U.S. economy. “I think it’s fair to say we’re on a path that looks exactly like that.”
Inflation has slowed to around 3 percent from a peak of nearly 9.1 percent in June last year as Americans begin to grapple with higher oil and gas prices, resumption of student loan repayments and high mortgage interest rates. But it still remains above the Federal Reserve’s 2 percent target.
“All inflation indicators are on the way down,” Yellen said.
Economists at Goldman Sachs backed Yellen’s predictions, this month cutting the probability that America will enter a recession in the next 12 months from 20 percent to 15 percent.
It was the third time in four months that Goldman Sachs had lowered its forecasts on the likelihood of a recession, after estimating the probability at 35 percent in March.
Treasury Secretary Janet Yellen (pictured) said over the weekend she was confident inflation would fall without plunging the US into recession
Barbie starring Margot Robbie grossed more than $1 billion at the box office
Milton Berg, who has worked in financial services since 1978, said that despite widespread optimism, a recession remains on the horizon
However, some analysts believe a recession is still imminent and the increasingly popular prediction of a soft landing may not come to pass as hoped.
Milton Berg, who has worked in financial services since 1978, said the collapse of Silicon Valley Bank earlier this year was “just the tip of the iceberg” and speculated that more companies could fail.
Berg told this Forward guidance Podcast: “Everyone has given up on a recession for some reason.” Suddenly the Fed keeps tightening, and suddenly everyone says, “No recession.”
But he warned: “It’s just amazing how people suddenly doubt a recession when there’s a strong market.” But now is a good time to worry.
“When the economy looks good, a surprise recession happens.”