Tough times ahead for US consumers - strategist

RT
Sun, 29 Oct 2023 05:15 UTC

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Decreasing spending power is signaling trouble for the economy, according to Chris Watling...

American consumers are facing challenging times, with household spending expected to cool further, Chris Watling, the chief executive of the financial advisory firm Longview Economics, has warned.

In an interview with CNBC this week, the strategist cited the latest economic indicators showing consumers have been quickly running out of excess cash while household savings have been under growing pressure.

Watling said:

"I think the US consumer is walking towards a cliff, basically. Of course, retail sales have been quite strong for the last few months, and everyone gets quite excited about that, but, actually, if you look at what's going on, the household savings ratio has been run down, and, in fact, real income growth has been negative for three months."

Watling pointed out that the consumer and the labor market are under a lot of pressure at the margins:

"We had a good payrolls month, but if you look at a lot of the indicators of where the labor market is likely to go, a lot of them are fraying at the edges."

The strategist added that a substantial labor market downturn could invoke a recession in the country. He cautioned:

"We're going to get to the point in the next few months. I think the US is in for a tough time."

According to a recent study by the University of Michigan, US consumer sentiment deteriorated in October in a third straight monthly decline, with households expecting higher inflation over the next year. Moody's Investors Service said in a report last month inflation and a deteriorating outlook for the US economy have been weighing on consumers.

Moody's pointed out that individual spending fuels about two-thirds of the US economy, and the vast majority of Americans now have less savings than they had before the pandemic after adjusting for inflation.

Comment: Gazans are looting warehouses. Will the US become as desperate?

The UN's Palestinian refugee agency has reported mass looting of aid warehouses in Gaza, saying thousands of people have broken into distribution centers to take flour and other "basic survival items" as the ongoing Israel-Hamas war makes their situation increasingly desperate.

UNRWA Affairs director Thomas White said on Sunday in a statement:

"This is a worrying sign that civil order is starting to break down after three weeks of war and a tight siege on Gaza. People are scared, frustrated and desperate. Several warehouses, including a facility in Deir al-Balah that stores aid brought in by humanitarian convoys from Egypt, were looted on Saturday. Tensions and fear are made worse by the cuts in the phones and internet communications lines. They feel that they are on their own, cut off from their families inside Gaza and the rest of the world."

Just over 80 trucks have crossed into the strip from Egypt since humanitarian aid began trickling in a week ago. No trucks could be brought in on Saturday because the loss of telecommunications services blocked the UNRWA from coordinating the aid convoy's passage. Phone and internet services were restored as of Sunday morning, the agency said.

White said:

"Supplies on the market are running out while the humanitarian aid coming into the Gaza Strip on trucks from Egypt is insufficient. The needs of the communities are immense, if only for basic survival, while the aid we receive is meager and inconsistent. We call for a regular and steady flow line of humanitarian supplies into the Gaza Strip to respond to the needs, especially as tensions and frustrations grow."

The UNRWA added that the current system for receiving aid trucks is "geared to fail." White claimed that there are too few trucks, the inspection process is taking too long, and the supplies coming in don't match the needs of aid organizations.