Fitch: Consumer spending will slow down in the US
Fitch Ratings, an international credit rating agency, stated that the increase in consumer spending will decrease to 1.9 percent this year due to slowing income growth in the United States, and that most of the slowdown is expected to begin in the second half of 2024.
In the statement made by Fitch, it was emphasized that sticky inflation, weak income growth and worsening Consumer Confidence in the USA paved the way for a below-trend increase in consumer spending in the second half of 2024.
It was stated in the statement that the increase in household real disposable income was 1.7 percent in the first quarter, and that this was a significant decrease compared to the 4.1 percent increase in the previous two quarters.
In the statement, it was pointed out that real labor income, which makes the largest contribution to total income, remained stable at 2.7 percent in the first quarter of the year, and it was stated that the cooling of the labor market will probably contribute to a further weakening of income growth in the second half of 2024.
Savings declined
In the statement, it was noted that the net wealth of consumers increased by 8.3 percent in 2023 due to the recovery in the stock market and real estate capital, and that consumers continued to use excess savings of an average of $ 44 billion per month since January.
In the statement, it was emphasized that the estimated excess savings decreased by 46 percent from the peak of $ 2.1 trillion in August 2021 to $ 1 trillion in March 2024.
It was stated in the statement that debt service is expected to show a higher trend in the coming quarters due to higher financing costs lasting longer, and that the annual increase in credit card expenditures, which peaked at 15.1 percent in the last quarter of 2022, decreased to 7.9 percent in the first quarter of this year.
Fitch increased its year-end inflation forecast in the USA to 2.9 percent
In the statement, it was pointed out that sticky services inflation and the still high nominal wage increase may cause the Fed to act very cautiously before starting interest rate cuts, and said, “Recent data showed that there is an increase in the core inflation momentum. Fitch has revised its end-2024 Consumer Price Index (CPI) forecast.” “The recent reversal in the momentum of basic services complicates the timing of interest rate cuts in the second half of the year.”
Olu Sonola, Head of Fitch US Economic Research, whose views were included in the statement, stated that consumer expenditures in the USA, which increased by 2.2 percent last year, are expected to increase by 1.9 percent this year, and said, “Further slowing of income growth, spending of pandemic savings and high real interest rates will continue.” “Due to this, most of the slowdown is expected to start in the second half of 2024,” he said.