Watch credit card companies, once they start pulling back on credit, the “R Word” comes into play.
“Davidson” submits:
Retail Sales reported dipping but continuing to hold at levels well above the pre-COVID trend as shown. Real Personal Income continues higher with past months revised higher. Many ask questions regarding the current dynamics. The St Louis Fed’s recent report on excess retirements may be what is showing up in the spending and income data vs the belief in stalled employment level per the Household Survey.
The St Louis Fed in a June 2023 note indicates that COVID resulted in a higher than normal level of retirements. https://www.stlouisfed.org/on-the-economy/2023/jun/excess-retirements-covid19-pandemic Considering recent actions of “Woke” themes penetrating corporate compliance and hiring practices to meet ESG guidelines imposed by outside institutional actors acting to remain ‘politically correct’, higher than normal retirements seemed likely to follow. By all appearances, this retirement pace appears to continue. The loss of employees and reported income becomes replaced by new employees and added retirement income with a boost to retail sales as retirees add leisure related spending. RVs and ATVs saw a surge in recent years, then a pull-back and now may see another surge with a new crop of retirees. Time will tell on this projection but this explains the income rise and retail sales remaining elevated.
Over time we should expect the pre-COVID Real Retail Sales trend to converge. It is impossible to predict whether the current level declines or simply moves horizontally till convergence. COVID created a new economic and social environment to which we are still adjusting. Nonetheless, there remains no sign of the pending recession many claim is impending. The current trends continue to suggest another 2yrs-3yrs of economic expansion with equity prices rising, rising inflation and rising interest rates.
I continue to expect economic expansion till delinquency rates rise to levels that force lenders to slow credit extension, A recession will follow credit contraction within 12mos. Not today.