Ahh, the time between Thanksgiving and Christmas is finally here. Give us your best tips on how to avoid doing any work and we’ll feature it on the next issue.

Due to overwhelming demand, we’re going to try to contextualize consumer spending in this moment in time.

There’s a bunch of articles on spending in the wake of a recession. None of them help put something together in your brain, because everybody measures things differently.

Or maybe because no one knows what they’re talking about.

So we’re gonna put together how consumers are feeling about the economy, and how that’s translating to their wallets.

It’s a super simple issue this week. Scan the graphs and you should have what you need.

1. But first, a little context…

We’re writing this under the assumption that a recession is coming, so here

Here’s an overarching assumption of consumer spending during a recession:

• Discretionary spending goes down.

  • Restaurants, luxury goods are out. Dollar stores and grocery stores are in.

• Heavy goods spending goes from ‘new’ to ‘used

  • Forget that 2024 Merc. Let’s go get a used Accord on auction.

Travel spending changes too. Although it gets a little weird.

2. Okay, how are consumers feeling?

The graph below pretty much sums it up. Consumer sentiment is in the toilet, touching 2011 levels.

Well, why is this happening? A couple of reasons…

• Higher prices. Inflation did a number on our mental health. We’re having palpitations about higher grocery, and gas prices (we saw bougie eggs for 10.99 for a half-dozen…why).
  

• Higher interest rates, obviously. That means financed stuff like appliances and cars (and homes) are going to experience slowdowns in sales

3. So how is this translating to spending?

So, Personal consumption has declined sharply from 2021-2022 up until now.

• Americans that were once flush with cash due to stimmy checks and freeing themselves from their commute are starting to slow down at the register.
  

• Higher prices and higher interest rates are certainly contributing to this pullback. As well as student loan payments starting up again for millions of people.

Again, none of this is investment advice.

What AI made this week

Leave it a Bauhaus architect to make America’s miracle into a boring building.

Have a great week!

Ahmed and Peter