Americans are spending like there's no tomorrow. That may not be enough to prevent a recession.
Briefly

Americans are spending like there's no tomorrow. That may not be enough to prevent a recession.
"I think the causality here is backward. A consumer slowdown is never the precipitating cause of an economic slump. Usually, consumption falls after employment materially cracks. When Americans stop spending, by that time, it's already too late. While Americans continue to spend their way through their troubles, it may not prevent an economic slump from taking hold. The notion that consumer spending can save the country from a recession contradicts several historical trends."
"For starters, consumption has managed to grow modestly in previous economic slumps. In several of the post-World War II recessions - 1948, 1970, 1982, and 2001 - real consumption expanded during the downturn. In other words, during those recessions, the best that spending could do was to help economic conditions from deteriorating further, cushioning the blow rather than preventing it altogether."
"Next, consumption has never declined before an economic slump; it's always happened after the economy began to go into the tank. Therefore, the growth in recent quarters does not look especially unusual. Assuming tracking estimates for the current quarter end up in the ballpark, average annualized growth in real consumer spending is expected to run at about 2.2% in the first two quarters of 2025."
Consumer spending accounts for roughly two-thirds of US GDP, but strong consumption does not necessarily prevent recessions. Historical recessions show consumption sometimes grew modestly (1948, 1970, 1982, 2001) and often cushioned downturns rather than stopped them, making consumption's average contribution during recessions close to zero. Consumption has historically fallen after employment weakened, not before, indicating causality runs from labor market deterioration to spending declines. Current consumer spending growth—projected around 2.2% annualized for the first two quarters of 2025—looks consistent with past patterns and may delay but cannot avert an economic slump if employment cracks.
Read at Business Insider
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