Could America’s Economy Be Headed for a Consumer Crunch?

American consumers have been unstoppable in their spending habits, initially splurging on home-exercise bicycles during the height of the pandemic and now shifting their focus to beachside holidays. Despite initial predictions of households being squeezed by inflation, consumer spending has remained strong and continued to boost American GDP at a faster pace compared to other G7 countries.

However, recent data has shown a slight slowdown in consumer spending growth, with monthly consumer spending falling from 0.7% in March to 0.2% in April. Overall spending has decreased in real terms, resulting in weaker retail sales. Companies such as McDonald’s and 3M have reported a decline in sales as customers are becoming more hesitant to spend.

The most recent spending data released on May 31st has led to a decrease in the prediction for annual GDP growth by the Atlanta branch of the Federal Reserve, reducing its “nowcast” for the second quarter of the year to 1.8%. This shift in consumer behavior has raised concerns about the future of American spending habits and its impact on economic growth.