CINCINNATI — With oil prices at $100 a barrel, gasoline prices over $4 in many areas, and everything else going up too, how long can consumers keep spending?
Inflation is now running at almost 8% annually, much more than your last raise.
Some analysts are wondering if all this all signals that a recession could be on the way, because those are the types of numbers that often trigger a recession, as was the case during the gas price shocks of the 1970s.
It's the opposite of 2020, when gas prices plunged, giving consumers more disposable income to buy new cars, furniture, boats, and campers.
Consumer index shows downturn
The just-released March University of Michigan Consumer Sentiment Index dropped 3 points, more than expected, due to economic worries.
That's the lowest level of consumer confidence in 11 years, the group says.
The financial services firm Goldman Sachs forsees a 35% chance of a recession in the next year.
So, how long can shoppers keep up the spending that got us out of the quick 2020 COVID-related downturn?
No one has the answer yet.
Hints of a coming slowdown
So from the "doesn't that stink" file, hints of a bumpy road ahead.
The CEO of Target and CFO of Macy's both said recently they are anticipating a slowdown in spending, with Macy's CFO Adrian Mitchell expecting it among lower income shoppers hit hard by gas prices.
Target CEO Brian Cornell says if gas prices continue rising, consumers will likely:
- Visit fewer stores.
- Purchase more house brands.
- Dine at home more.
- Limit their driving.
And with stimulus checks and child tax credits all having run out, that stinks.
A slowdown would be bad news for the economy, as it was in 2008.
As always, don't waste your money.
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