Investors Lower Consumer Outlook Amid Rising: Despite strong markets, investment managers are more cautious since troubling data suggests the average American shopper is on the financial edge. Even though the stock market is great, this is true.
Even while jobless rates are low, the US Federal Reserve is raising interest rates, making it tougher for consumers to pay their obligations. New numbers reflect the dismal situation: The Apollo Group discovered that community bank credit card defaults are at an all-time high, and August consumer sentiment dropped more than market analysts expected.
Last week, It was reported that more individuals aren’t paying off their store cards than before the recession. Late payments will also reduce Macy’s credit card sales income by 41% over the previous quarter.
Borrowers will have to start paying back their $1.1 trillion federal student loans in October. Does it matter? TransUnion found that many users may lose $500 per month.
John Hancock Financial Management co-chief financial analyst Emily Roland said, “As we move into the last act of 2023, the American consumer is on thin ice.” The “American consumer is in danger.” Roland’s faith in bonds and other risk-averse industries like healthcare grows as the holiday shopping season approaches.
Despite these issues, the US economy added 187,000 non-agricultural employment in August, higher than predicted. The Bureau of Labor Statistics reports a 3.6% to 3.8% increase in unemployed workers. The government expected many employment gains in June and July, but they didn’t. The uncertain employment market may lower prices but reduce spending, which is terrible for purchasers.
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The Commerce Department reports that August consumer spending was somewhat higher than predicted. However, people saved less than in November 2022. Jake Jolly of BNY Mellon Investment Management said, “This stock of savings caused by the pandemic is quickly running out.”He doubts the stock market and thinks the economy will worsen.
Ernst & Young head economist Gregory Daco expects consumer spending growth to fall from 2.3% this year to 0.9% in 2024. Higher interest rates, fewer money, and resumed student loan payments contributed to this reduction. Daco guesses with numerous things.
In the coming weeks, consumer loans and ISM services sector trends will be detailed. The second industry accounts for two-thirds of the U.S. economy.
The Atlanta Fed’s GDPNow algorithm expects 5.9% third-quarter US economic growth. So far, betting against employee retention hasn’t worked. Jason Draho of UBS Global Wealth Management believes falling interest rates in the fourth quarter of 2023 and early 2024 will aid struggling households.
The consumer discretionary sector is up roughly 34% this year, three times the S&P 500. This industry has fast-growing companies like Amazon, Royal Caribbean, and Chipotle. Nothing has changed recently, suggesting things may be slowing down. Villere & Co. portfolio manager Sandy Villere says, “While the rally in this sector is strong, its speed is likely to slow in the coming quarter as the technology markets settle down.”
Villere, like many others, is investing more in low-risk industries like healthcare. His words: “It’s too early to give up on the consumer,” “but there are definitely warning signs.” This is especially important given that Federal Reserve interest rate hikes are damaging the economy and making a recession more likely. “There are red flags definitely flying.
Our Reader’s Queries
Is consumer spending up or down in 2023?
Despite facing numerous challenges such as high interest rates, inflation, political instability, and fluctuating energy prices, the American consumer continued to spend in 2023. Retail sales reached an all-time high, and the US economy grew at an impressive rate of 5.2% in the fourth quarter. This is a testament to the resilience and determination of the American people, who refused to let external factors dampen their spirits. Despite the odds, they kept the economy thriving and moving forward.
Is consumer spending increasing or decreasing?
Consumer spending saw a 9.0 percent increase in average annual expenditures from 2021 to 2022, which is comparable to the 9.1 percent increase from the previous year.
Will consumer spending increase in 2024?
Economic experts have identified various trends that are expected to boost economic growth, with the consumer sector being a key driver. According to BofA, consumers are likely to continue spending in 2024, albeit at a slightly slower rate. This positive trend in consumption growth is expected to persist.
What is the 2024 outlook?
Looking ahead, it seems that 2024 will be a year of sluggish GDP growth, with single-digit earnings growth and returns on the median S&P 500 stock. In light of this, it’s wise to consider a diversified investment portfolio that includes cash, long-duration government bonds, high quality corporate bonds, and equities. This approach can help you weather the economic challenges that lie ahead.