Consumer confidence is up despite current bank troubles — will it last?
Consumer confidence is up despite current bank troubles — will it last?
One of the most remarkable stories of the past couple years in this economy has been the persistence and resilience of the American consumer.
We’ve just kept spending through rising prices and rising interest rates. But there are signs that the American consumer may be starting to think twice about spending it up.
This week, the polling firm Ipsos released its Global Consumer Confidence Index for March which revealed that consumers’ expectations for where the economy is headed have been shaken up a bit. So what happens if they’re shaken up more, and consumers lose a lot of confidence?
In terms of routine spending, people seem pretty unbothered by the current turmoil in the banking sector, according to Chris Jackson with Ipsos.
“For the average American consumer, something like the failure of a bank that primarily services tech startups isn’t something that actually has a direct impact on their day-to-day life,” he said. Neither does it have an effect on, say, their grocery budget.
“Not like, gas prices going up a quarter or a dollar,” Jackson added.
But headlines about SVB’s collapse do have many of us bracing for future economic trouble.
“And when people worry,” said Wendy Edelberg, a senior fellow at the Brookings Institution, “they keep the money in the bank account just in case they need it for bad times ahead.”
Edelberg said those savings will be diverted away from any big discretionary purchases consumers might have been planning.
Softening of consumer demand could help tame inflation “if recent events cause people to say, buy fewer cars, do fewer renovations in their homes, take a little bit less travel because they’re worried,” she said. And maybe get us closer to that soft landing the Fed has been after.
Consumers haven’t yet seen a reason to rein in their day-to-day spending, said Ravi Dhar, who directs Yale’s Center for Consumer Insights.
“As long as you have a job, as long as you’re getting some benefits … I think your own condition is not affected, and that often does not impact your short-term spending,” he said.
But as for big ticket purchases, Dhar expects consumers to hold on to their wallets and take a wait-and-see attitude.
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