07 Jun 2022
We are happy to introduce to you our new blog segment The Charts of the Week. These charts are chosen at random, but all have something to do with the markets, investing, or the economy. In this week’s edition of The Charts of the Week, we will be looking at consumers. What about consumers you ask? Well, U.S. consumer sentiment, consumer spending, and the personal saving rate.
What do these mean?
Here is a quick overview:
- Consumer sentiment is an economic indicator that measures consumers optimism about their finances and the state of the economy.
- Consumer spending is the total money spent on goods and services by individuals and households.
- The personal savings rate is the percentage of people’s income left after they pay taxes and spend money.
What do the charts show?
In normal circumstances, the higher the consumer sentiment is, the more confident consumers feel, and the lower the personal savings rate is. In reverse, you would imagine as consumer sentiment gets less optimistic, people would be saving more and spending less. But according to the charts below, consumer sentiment is getting close to a 15-year low, but the consumer is continuing to spend and is dipping into their savings to do so.
The takeaways:
- U.S. households are still spending down excess savings accumulated during the pandemic, putting upward pressure on inflation.
- If the U.S. economy is heading into a recession like some analysts predict, consumers don’t appear to be in the loop.
- If consumer spending stays strong, a recession could be prevented.
The question is: Will this spending last?
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