The resilience of the U.S. economy is defying expectations this year as consumers continue to spend in the face of higher prices. Real personal consumption, which accounts for inflation, has stayed in a narrow range over the past 12 months and grew to 2.6% year over year in April.
However, recent signs of weakness, such as slowing demand for consumer loans, could signal that consumers are finally feeling the pain of higher interest rates. Because consumer spending accounts for roughly 70% of U.S. GDP, it will be a key determinant in the economy’s ability to continue outperforming the rest of the world.
At the moment, we believe there is not enough evidence to suggest consumer resilience is collapsing. Unless there are further downward revisions or signs of weakness in spending, the resilience of the U.S. consumer will likely continue to support slowing but solid economic growth.
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