Consumers Are Becoming More Discerning

Key Takeaways

  • Interest rates and inflation dent consumer confidence
  • Consumers are becoming more discerning
  • Household balance sheets remain healthy

As goes the consumer, so goes the U.S. economy. As Wall Street knows, the importance of the consumer cannot be overstated. That’s because consumer spending is the main engine of growth, representing ~70% of US economic activity – nearly 10% more of the economy than it did in the early 1980s. That is why there is so much focus on what the consumer will do next. Thus far, the consumer has been resilient – supported by a strong job market, excess pandemic savings and solid wage gains. However, some cracks have started to surface. Below we discuss a myriad of factors that are impacting the consumer, highlighting the more challenged areas in red, concerning, but not overly problematic areas in yellow, and positive areas in green, along with our view on where the consumer and the economy will go next.