July 22, 2024
Finance

Why consumer spending may slow in coming months


A recent survey from the New York Federal Reserve found that while most consumers expect inflation to fall, they expect their earnings growth and spending to fall as well. With this, consumers are paying closer attention to what they spend their money on.

Tim Quinlan, Wells Fargo Senior Economist joins Yahoo Finance Live to weigh in on current consumer trends.

With declines in the job market, consumer credit, and excess savings, Quinlon expects less spending. “That doesn’t mean consumers completely go into hiding”, Quinlon points out, however “we don’t have quite the same tailwinds that we had when we were setting out at the beginning of last year.”

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor’s note: This article was written by Eyek Ntekim

Video Transcript

SEANA SMITH: So Tim, what do you think that then tells us about what we could see potentially play out over the coming weeks, over the coming months, as maybe consumers do run out of their ability to spend, or what they want to spend on some of those discretionary items?

TIM QUINLAN: Yeah. That’s a great way of thinking about it, Seana. Because I think if we were to roll the clock back to New Year’s last year, at that time, consumer credit was very affordable and easy to get. The job market was ripping. January, we added like half a million jobs last year. So the economy is going really, really strong. And we have a huge pile of excess savings from the pandemic era that are able to fuel the bacchanalian surge in spending that characterized last year.

Do we have those three things at our back this year? Not so much. The unemployment rate is on the rise a little bit. Participation rate, while high, has come down a little bit. The pace of job growth has slowed. I recognize 216 was a little better than expected. But it’s less than half what it was in January of last year.

And lastly, the availability of credit is no longer as cheap, or as widely available as it was a year or so ago. That doesn’t mean consumers completely go into hiding. Most people still have a job. They still have some access to credit, even if that credit now costs more than it used to. And pandemic era savings aren’t completely dry. There’s still some out there. But we don’t have quite the same tailwinds that we had, when we were setting out at the beginning of last year.



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