Advert
Supported by
Consumer spending has fueled the economic recovery after the impact of the pandemic. Now, wallets are smaller and some are feeling the difference.
By Sydney Ember, Jordyn Holman and Julie Creswell
The resurgence of the economy after the surprise of the pandemic can be explained through a single driving force: the consumer. Driven by savings and encouraged by a booming hard-work market, Americans spent exuberantly on goods like furniture and electronics, and then on services. adding air and going out to dinner.
The question is how long this expense will last.
Despite the contortions of global markets, many economists warn that there is no explanation for panicking, at least not yet. In July, there was a notable slowdown in hiring and an increase in the unemployment rate to its highest point since October 2021, still customer spending remained robust. Wages are rising, albeit at a slower pace, and job cuts remain low.
“Overall, there’s no evidence of a slowdown in customer spending,” said Gregory Daco, chief economist at consultancy EY-Parthenon. Strong spending helped fuel a better-than-expected economic expansion in the spring.
That could change if the labor market slowdown accelerates.
Some consumers, especially those with lower incomes, are already feeling the double effect of emerging costs and interest rates weighing on their finances. Credit card defaults are on the rise and household debt has skyrocketed. Pandemic-era savings have declined. In June, Americans accumulated only 3. 4% of their after-tax income, compared to 4. 8% a year earlier.
On calls with investors and in boardrooms across the country, business leaders acknowledge that consumers are no longer spending as freely as they once did and are in favor of the decline continuing.
On Wednesday, Disney cited a “moderation in customer demand” that “exceeded our past expectations” regarding the challenging new outlook for its theme parks, key to its profitability. “The lower-income customer is feeling a little bit of stress,” as they have less to spend on entertainment, Hugh F. Johnston, Disney’s chief monetary officer, told analysts.
We are recovering the content of the article.
Allow JavaScript in your browser settings.
Thank you for your patience as we determine access. If you’re in Reader mode, log out and log in to your Times account or subscribe to the full Times.
Thank you for your patience as we determine access.
Are you already a subscriber? Login.
Do you want all the Times? Subscribe.
Advertisement