Credit balances are not the only consumer indicator running high.
My family has just concluded a fantastic summer that included air travel, roller coasters, road trips, new restaurants and no small amount of ice cream. As the school year resumed, I was looking forward to a steadier daily routine as well as a more predictable pattern of our spending. Alas, we’re now shelling out for new backpacks, shoes, sports leagues and school lunches. We are doing our part to prevent a recession.
Consumption has been the core of the post-COVID economic cycle. First, we accrued cash as our usual spending patterns were closed off in 2020. Pandemic stimulus and deferred purchases pushed up excess savings, equipping most households for a stretch of free spending. Our hesitancy to call for a recession hinged on expectations that households would sustain their activity.
A range of reports now show a trend of household assets falling and liabilities rising, leading some to wonder whether consumers are overextended. Overall, we believe households are managing their finances appropriately. In many respects, household balance sheets are getting back to normal. For better or worse, “normal” includes some additional stress for some households.