We’re Still in a No Landing Economy

Consumers are shopping, but not dropping.

you can add US consumer collapse Add it to the list of things that almost everyone expects to happen but that there is no sign of actually happening.

American household spending is Main drivers of economic growth In the post-pandemic period. But since the economic recovery began, analysts have warned that drying up inflation, an end to excess savings and tightening credit could set consumers back.

In theory, this might not be a disaster. The economy will slow, but it won’t necessarily go into recession. Inflation will likely fall. In fact, many analysts believe that even with low unemployment rates, consumer spending has been suppressed.soft landing

That’s a good idea, but There is little evidence that consumers are retreating. In a meaningful way.

Retail sales in April were stronger than expected

That’s true Employment growth and retail sales April was weaker than expected. But it’s primarily a story of rising expectations rather than economic weakness.

The economy added 175,000 jobs in April, a solid increase. 60% of them belong to the private sector, Employers still see enough demand to justify salary increases. And it’s important to remember that the acyclical government and government-adjacent sectors of the labor market also remain important in terms of adding purchasing power to the private sector. Government and hospital employment may be driven by government spending, but government and hospital employees still buy goods and services from businesses.

There’s a good argument that retail sales were actually stronger than they appeared. The major drag on retail sales in April was due to the “non-store” sector, which is primarily online sales.about 40% online sales is from a single company; Amazonheld a very large spring promotional event in March, almost certainly bringing forward sales from April.

Your Amazon Prime box will be loaded into your shipping cart. (AP Photo/Mark Lenihan)

Let’s run through Recent history of online sales. Sales in February decreased by 0.1%. Online sales in March increased by 2.5% in one month. Sales for the next month decreased by 1.2%. This gives him a 3-month growth rate of 0.8% and an annualized growth rate of 3.2%. Compared to the previous year, online sales increased by 8.7% in his three months from February to April. Year-to-date sales increased 10.1% compared to the first four months of 2023.

Total retail sales increased by 3.5% Comparison with one year ago through April. Retail sales, which exclude cars, trucks, parts and gas station sales, rose 4.2%. Sales excluding bars and restaurants rose 3.1%. These are all impressive growth rates that defy the idea that consumers have exhausted their purchasing power.

This is especially noteworthy. These sales tend to be products, inflation is much more subdued than at its peak and much more moderate than in the service sector. Durable goods prices actually fell 1.9% year-on-year, according to the Personal Consumption Expenditure Price Index through March. So this growth is not just about people spending more on the same goods. That’s real growth.

I can’t see the end

Consumer sentiment survey The economy has softened in recent months, but even when it was weaker than it is now, consumer spending was strong. Bank of America’s monthly consumer spending shows: People are actually preparing to spend more. Bank of America says expectations for big spending are rising. In the May survey, 43% of those surveyed said they planned to buy a car this year, compared to 35.8% the previous month and 41.2% the previous year. Home purchase plans jump to 24% From 18.5%.

Service expenditures are very high. Spending at restaurants and bars, the services sector of the government’s retail sales report, rose 0.2% in April compared with March and 5.5% from a year earlier. Overall spending on services rose 0.6% in March, according to the latest personal consumption spending data available. This followed a 0.8% rise in February and a 0.9% rise in January.

Even low-income consumers are finding ways to spend. Bank of America credit and debit card usage data shows that even excluding groceries and gasoline, low-income households still spend more than higher-income households. clearly, Very low unemployment, low levels of layoffs, and rising wages It still fuels consumption even among Americans at the lowest economic levels.

This means that growth is unlikely to suddenly stop. At the same time, inflation is unlikely to fall significantly from the base rate of 3% to 3.5% over the past six probably means The Fed will keep policy on hold until at least after the election, and likely into next year..

This is a politically unpopular view. Both conservatives and progressives currently have a bias that the economy is on the brink of collapse. Conservatives expect Joe Biden’s economic policies to stifle growth and lead to a hard landing. Progressives hope the economy will weaken enough, but not more, to justify a pre-election Fed rate cut, ensuring a soft landing.

But the data shows that both sides are likely to be disappointed.What growth and inflation tell us We are still in a ‘landless’ economy.