Consumers have cash and trust

Latest statistics on the consumer economy reveal a year of hair-on-fire headlines about inflation and recession

There should be many red faces today within the scrum of economic pundits and bean counters who have been chattering all year that inflation and the lingering effects of the pandemic would inevitably drive the US economy into a ditch. The results won’t be known until next year, but this could prove to be a December to remember how misguided they’ve been.

Just in the last week or so, we learned from the Federal Reserve that despite a personal American savings rate scraping along at a 17-year low, consumers are sitting on a pile of disposable cash. The Fed’s measure of “checkable deposits” for households and nonprofits — a measure of cash on hand — hit a record high of $5.12 trillion at the end of the third quarter, an astonishing 20% ​​increase from the end of 2021 .

It seems that consumers have cut back on their savings because they can. All that cash sloshing around has helped consumers sustain a total net worth which set a record in the first quarter of this year.

At the end of the third quarter, it was more than 25% higher than it was three years ago, just before the global Covid-19 shutdown. With household debt up about 20% over the same period, the balance sheet of US households appears to be robust.

With unemployment at a historic low, it’s no surprise that Americans are becoming more confident about job security, according to a biweekly Forbes Advisor-Ipsos survey. Although the reading is well below pre-pandemic levels, it has increased with fewer people reporting that they know someone who has been laid off.

Conference Boarda global economic think tank, recently reported that “consumer confidence rebounded in December, reversing consecutive declines in October and November to reach its highest level since April 2022.” A similar trend appears to be developing in the EU.

Inflation? Good news there too.

The Real Time Inflation Index from Truflation, an independent inflation data aggregator, found the latest year-over-year rate to be just under 6%, down from 7.4% two months ago.

Finally, and most importantly, the US economy grew in the third quarter by a healthy 3.2%, driven by strong exports and healthy consumption.

As someone in the business of understanding consumer attitudes and predicting economic outcomes, the constant drumbeat of impending doom may dominate the news, but consumers aren’t listening. They are too busy shopping!

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