While many Americans are worried about where US economy go, few have changed their Expenditure habits in anticipation of a slowdown.
Almost three -quarters, or 73%, of adults said they were “financially stressed”, most of them pointing the tariff wars as guilty, according to the A recent CNBC / SurveyMonkey online survey.
And yet, consumption expenditure remained remarkably resilient.
In part because of the imminent rates, buyers are Purchase of panic. In fact, consumption expenditure was even stronger than expected in March, according to the Trade department And checked again in April, the data published on Wednesday from JP Morgan watch.
JP Morgan has also increased its chances for a United States and global recession At 60%, at the end of the year, compared to 40% before.
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Prepare the ground for a slowdown
Consumer expenditure is considered the backbone of the economy because it represents a significant part of the gross domestic product and feeds economic growth.
In a speech Earlier this month before business journalists in Arlington, Virginia, President of the Federal Reserve Jerome Powell said “the economy is massively motivated by consumer spending”. Powell also said he expects the president Donald Trump Pricing policies to increase inflation and lower growth.
Most experts agree that faced with higher prices for many consumer goods, Trump's prices are launching a new wave of declining feeling, which plays a big role in determining the direction of the economy.
The expectations of conference advice expectationswhich measures the short -term perspectives of consumers, plunged at its lowest level in 12 years and below the recession, signaling a risk of increased recession. The consumer survey of the University of Michigan has also shown Feeling More than 30% since December among the persistent concerns of a trade war.
“In a scholarship and the global economy,” the rise in the increase in the resulting turmoil has an impact on consumer concerns concerning higher prices and future growth in consumer spending, “said Jack Kleinhenz, chief economist of the National Retail Federation.
How prices have an impact on household budgets
Trump administration Prices on a crowd of other countries are currently in the middle of a 90 -day break, with a basic rate rate of 10% applying rather to all goods imported at all levels. The break must expire on July 9, with Trump praising a series of rate negotiations With foreign leaders by then.
According to an analysis of the Center for Tax Policy of Brookings Urban, if the lower rate rates in force during the 90 -day break remain in vigue $ 3,100 in 2026. A separate study of the LAB budget in Yale estimates These prices could cost the average cleaning of around $ 3,800 per year.
“Household budgets remain under pressure and very sensitive to additional price increases,” said Greg McBride, chief financial analyst of Bankrate. “Inflation will continue to be at the heart of what consumers think of their finances and their additional expense capacity.”
An imminent drop
The financial constraints associated with the expectations of the economy are ultimately weakening to spend consumers, which can ensure that companies to reduce or dismiss workers, according to Sasha Indarte, assistant professor of financing at the Wharton school of the University of Pennsylvania. “It is a self-fulfilling prophecy.”
“Even a small initial reduction in spending is amplified,” she said. “One person's expenses become another person's income – you can get this echo effect.”
But basic economic theories do not tell the whole story, added Indarte.
Even when consumers intend to reduce, they do not always release their expenses as much as they wish or should. Behavioral biases and inertia also play a role, according to India.
“Even when our environment changes, we are happy to do what we were doing. People are used to going to the same restaurants or driving the same car, we are not used to making adjustments,” she said. “There is a preference for similarity.”
However, once household budgets are reaching their limits, consumers will no longer be able to afford the lifestyle that they were used to-it is “when the shock materializes,” she said.
At this point, consumers will have to reign in their expenses, whether they wish or not, she said, which could lead to a drop In the coming months. This prediction was also recently shared By JPMorgan analysts in a research note on Wednesday and the president of the Federal Reserve Bank of Chicago East Goolsbee Sunday.
“We have to worry,” said Indarte.
