The trusty American consumer is poised to run out of steam by early next year, investor survey says – DIGIWIZ CENTRAL

The trusty American consumer is poised to run out of steam by early next year, investor survey says

Shoppers wait in a check-out line at a Costco wholesale store in Orlando.

Paul Hennessy/SOPA Images/LightRocket via Getty Images

Spending by the ever-reliable US consumer is about to fizzle out, according to a Bloomberg investor survey. 
Over half of respondents believe that personal consumption will shrink in early 2024. 
US households are having their savings depleted thanks to the highest borrowing costs in 22 years.

America’s most potent economic force – the consumer – may finally run out of steam around the beginning of next year, according to a survey of 526 investors polled by Bloomberg

Over half of the respondents to its Market Live Pulse survey believe that personal consumption will decline in early 2024 – and another 20% of those believe the inversion could happen as early as the final quarter of this year. 

Americans’ cash pile has kept consumer spending afloat in the COVID-19 era and beyond, as pandemic stimulus and excess savings supported the economy even as the Federal Reserve raised interest rates to their highest levels in 22 years. 

Such resilience has staved off widespread recession fears, but as household savings run out, the fortunes of the US economy could reverse. 

Indeed, excess savings accumulated since the pandemic are poised to evaporate by as early as the end of September, the Federal Reserve Bank of San Francisco has said.

Household savings in the US have fallen every month for the past 23 months and are poised to run dry in the third quarter, its research indicates

Billionaire investor and DoubleLine Capital CEO Jeffrey Gundlach echoed the sentiments from the Bloomberg survey last week, highlighting a “dangerous cocktail” for US consumers, consisting of inflated living costs, steeper rents, larger interest payments on their credit cards, the resumption of student-loan repayments, and taxes coming due.

“I think the economy is going to hit a wall in the next six or eight months or so, and there’s going to be a real shutdown in consumer activity due to all of these interest payments that have to be made,” he told Fox Business on Thursday.

“Right now we’re in a very tricky situation,” he added. “We still have very high prices, but we don’t have all of that funny money around anymore, and the excess savings are going negative.”

“The Big Short” investor Michael Burry has also been loudly sounding the alarm on the potential for US consumers to run short of money in the face of historic inflation and surging borrowing costs. The famed investor says the drying up of consumer savings is set to hammer corporate profits as spending declines.  


Read the original article on Business Insider
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