Source: firsttuesday Journal —
Earlier in 2022, an economic recession seemed inevitable by year’s end. Two consecutive quarters of negative gross domestic product (GDP) — typically the main indicator of a U.S. recession — along with the bear market experienced in the stock market, made a recession declaration all but official.
However, with news of positive GDP growth in the third quarter (Q3) of 2022, along with the ongoing jobs recovery, worries of an economic recession have somewhat eased. This small bounce in GDP was attributed to higher consumer spending — hello, inflation — which was sufficient to counteract a 7.4% decline in the housing sector, according to the Bureau of Economic Analysis.
But to fuel this amount of consumer spending, households are saving less. The national personal savings rate is at a decade’s low, at just 3.5% as of August 2022. Today’s savings rate has plummeted by necessity, as households struggle to make ends meet under pressure of the highest consumer price inflation since the 1980s.
As a senior economist for Wells Fargo recently put it in the New York Times, as long as spending continues to outpace incomes, consumers are on “borrowed time.”
While an economic recession has not yet arrived in 2022, it’s only a matter of time; for housing, the recession is already here.
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