Fitch Report Warns of Possible U.S. Consumer Spending Slowdown

A recent report by the global credit rating agency Fitch, released on Wednesday, revealed the possibility of a significant slowdown in consumer spending in the United States in the fourth quarter of 2023. This potential slowdown is attributed to several key factors:

Job Market and Wage Growth

Fitch cited a cooling job market and weakness in wage growth in the United States as contributing factors to the anticipated consumer spending slowdown.

Monetary Policy Impact

Fitch also noted that the tight monetary policy pursued by the U.S. Federal Reserve will have an impact on consumer spending within the country. This policy includes actions such as interest rate hikes and other measures to control inflation.

Past Spending Trends

Consumer spending in the United States has remained relatively strong over the past three quarters, expanding at annual rates of 4.3%, 1.7%, and 3%, respectively.

Future Projections

However, Fitch expects a potential decline in consumer spending to 1.2% in the final quarter of this year, followed by further weakness in the first half of the next year.

Savings Reserves

Fitch pointed out that consumers within the United States continue to draw down on the substantial savings reserves that were built up during the peak of the COVID-19 pandemic.

Warning on Surplus Savings

Furthermore, Fitch warned that if this pattern continues, support for spending from these pandemic-related surplus savings could gradually diminish by the end of the year.

The report highlights concerns about the resilience of consumer spending in the face of changing economic conditions and monetary policy, and it underscores the importance of monitoring these trends for their potential impact on the broader U.S. economy.