The question isn’t whether Americans will eventually cut back on their spending, but whether they’ll cause a recession when they do.
The US economy is being kept afloat with lawnmowers, cars and vacations. US consumers have kept buying these things despite high inflation and the contractionary policy of the Federal Reserve, and they deserve thanks not only for the recession that still has not come, but for the fast pace of recent economic growth.
And yet, the economy doesn’t feel sustainable. Consumers have to cut back eventually, right? And when they do, does that mean a recession?
Part of the answer can be found in Americans’ bank accounts. A few years ago, they were flush with pandemic checks, but their owners had nowhere to spend their money. Now question of how much savings Americans have is as contested as the race for speaker of the House (and it has lasted much longer). There are conflicting reports about whether the excess savings have run out, even though spending is still strong. No one is sure what is going on.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
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