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US Consumer Spending Faces Major Slowdown: Are We Heading for a Recession?

by Team Lumida
June 4, 2024
in Macro, Markets, News
Reading Time: 3 mins read
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US Real Disposable Income Growth Slows Down

Source: Bloomberg

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Key Takeaways

  1. Consumer spending dipped in April as real disposable incomes stagnated.
  2. Reliance on credit and declining savings signal potential economic slowdown.
  3. Fed’s high-interest rates aim to curb inflation but risk stifling growth.

What Happened?

American consumers are hitting the brakes on spending. Real disposable incomes barely rose over the past year, and the saving rate has dropped to a 16-month low. With pandemic-era savings dwindling, many Americans are turning to credit cards to maintain their lifestyle. This shift is evident in April’s consumer spending report, which showed a decline in spending on cars, restaurants, and recreational activities. Companies like Best Buy have noticed shoppers switching to cheaper brands, indicating increased price sensitivity. Wages and salaries grew by just 0.2% in April, the smallest increase in five months, further highlighting the cooling job market.

Why It Matters?

This slowdown in consumer spending is significant for several reasons. First, it suggests the US economy is losing the robust momentum it had in 2023. Second, it aligns with the Federal Reserve’s efforts to curb inflation by keeping interest rates high. Gregory Daco, EY chief economist, noted, “Slower labor market momentum will continue to limit income growth and push more families to exercise spending restraint.” This dynamic could lead to reduced economic activity and potentially a recession if consumers continue to cut back. The shift in spending habits, with higher-income consumers seeking deals and prioritizing staples, has already boosted sales at discount retailers like Walmart and Dollar General.

What’s Next?

The Federal Reserve will closely monitor upcoming data, especially the fresh government jobs report due Friday. Fed policymakers aim to strike a balance between taming inflation and preventing an economic breakdown. While the recent decline in consumer spending may help reduce inflationary pressures, it also raises concerns about the economy’s resilience.

Source: Bloomberg
Tags: consumer spendingFederal ReserveUS Economy
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© 2025 Lumida Wealth Management LLC is an SEC registered investment adviser. Privacy Policy. Cookies Policy.
Disclaimer Important Information This site is for informational purposes only. Information presented on this site does not constitute as investment advice.

Lumida Wealth Management LLC (‘Lumida”) is an SEC registered investment adviser. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.

Lumida's website (referred to herein as the "Website") is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of the Website on the Internet should not be construed by any client and/or prospective client Lumida’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet.

Any subsequent, direct communication by Lumida with a prospective client will be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides.

‍Lead Capture Forms: By submitting your contact information in the forms on this site, you are not obligated to invest in Lumida's product or services.
‍Address: Lumida Wealth Management, 25 W 39th Street Suite 700, New York, NY 10018