US consumer spending will shrink for the first time since the pandemic, investors say – as Treasury Secretary Janet Yellen says she feels ‘very good’ about averting a recession
- According to a Bloomberg poll, consumers will reduce their spending in early 2024
- That would reduce inflation, but could trigger a recession
- Treasury Secretary Janet Yellen says she has confidence in a ‘soft landing’
US consumers will cut back on spending for the first time since the pandemic in early 2024 as they battle looming financial pressures, a new survey shows.
Americans have so far defied analysts’ expectations of a recession by maintaining strong spending to shore up the economy. Consumers spent money on record-breaking blockbusters and concert tours this summer, including Taylor Swift’s Eras Tour and Margot Robbie’s Barbie.
But experts say that may be coming to an end.
About 56 percent of the 526 investors surveyed Bloomberg said consumption would most likely decline in the first quarter of 2024.
Meanwhile, 21 percent said the inflection point could come sooner, in the fourth quarter of 2023, and the rest thought 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 spent money on record-breaking movies and concert tours this summer, including Taylor Swift’s Eras tour and Margot Robbie’s Barbie
Barbie earned more than $1 billion at the box office, while Swift’s Eras Tour may have contributed about $5 billion to local economies in the US.
‘The big question is: is this power in consumption sustainable?’ noted Anna Wong, Bloomberg Economics’ chief U.S. economist, who expects a recession to break out by the end of the year. “It’s not sustainable because it’s driven by these one-off factors.”
That prediction comes after Treasury Secretary Janet Yellen said this weekend that she was confident inflation would fall without dragging the US into a damaging recession.
“I feel very good about that forecast,” she told Bloomberg on Sunday when asked about her previous hopes for a soft landing for the US economy. “I guess you’d have to say we’re on a path that looks exactly like this.”
Inflation has fallen to about 3 percent from a high of nearly 9.1 percent in June last year as Americans deal with higher oil and gas prices, the resumption of student loan payments and high mortgage rates. But it still remains above the Federal Reserve’s 2 percent target.
“Every measure of inflation is on its way down,” Yellen said.
In support of Yellen’s predictions, economists at Goldman Sachs this month cut the chance that America will enter a recession in the next 12 months from 20 to 15 percent.
It was the third time in four months that Goldman Sachs cut its forecasts on the likelihood of a recession, after putting the chances at 35 percent in March.
Treasury Secretary Janet Yellen (pictured) said this weekend that she was confident inflation would fall without dragging the US into a recession.
Barbie, starring Margot Robbie, earned 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 is looming
But some analysts predict a recession is still looming, and the increasingly popular prediction of a soft landing may not turn out 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 the Forward guidance podcast: ‘Everyone has given up on a recession for one reason or another. Suddenly the Fed continues to tighten and suddenly everyone says: no recession.’
But he warned: ‘It’s just amazing how, when you have a strong market, people suddenly start to doubt a recession. But now is a good time to worry.
“When the economy looks good, you’re going to have a surprise recession.”