قالب وردپرس درنا توس
Home / Business / BANK OF AMERICA: Here are three reasons why US consumers are likely to spend less in the future, derailing one of the few bright spots in the economy

BANK OF AMERICA: Here are three reasons why US consumers are likely to spend less in the future, derailing one of the few bright spots in the economy



Reuters

  • Consumer spending remains strong despite warnings of recession and global economic slowdown, but Bank of America Merrill Lynch found a collection of negative signals that could lead to behavioral spending.
  • Slow spending can lead to a recession by hitting the company's profits and asking for cuts in positions.
  • The team highlighted non-mortgage debt, slowing job growth and volatile consumer sentiment as the three critical threats to consumer spending.
  • This is how these threats look at economic expansion, and what to watch out for.
  • Visit the Business Insider homepage for more stories.

Consumer spending data has shown steady strength amid several downturns, but Bank of America analysts Merrill Lynch found three threats that could dampen the economic driver.

Consumer spending accounts for approximately 70% of US GDP, and a decline in key metrics may slowly drain capital from the country's money markets. As consumers spend less, companies earn less and jobs are usually cut to reduce costs.

Warnings about a global economic slowdown and continued pressure from the US-China trade war are making consumer data even more relevant, as a hit on consumer behavior can set the wheels for economic contraction. The recent Federal Reserve rate cuts helped some secure a capital increase through debt refinancing, but consumers who do not own homes are expected to moderate their spending through 201

9, BAML said Friday.

"Headwinds are stronger than headwinds, in our view," wrote the team led by Michelle Meyer. "The main challenge has been the weakening of the labor market combined with increased geopolitical risk."

Here are the three most important threats to consumer spending described by BAML analysts.


Non-Mortgage Debt

Bank of America Merrill Lynch

The Fed's recent cut allowed some Americans to trim some of their largest debt, but other debt sources continue to pile up. The analysts "see little sign" of the lower prices that hit the daily consumer, and warn that the amount of debt outstanding across the country may begin to drag on consumer habits.

The relationship between consumer debt service and sans mortgages has slowly grown while mortgage debt has fallen with reduced interest rates. Ignoring this steady increase leaves investors with only part of the country's debt history, BAML said.

"When we focus only on mortgage debt, we can argue that there has been meaningful impairment in an environment with low interest rates," the analysts wrote. "This is not the same story for other consumer debt."


Volatile sentiment

Bank of America Merrill Lynch

Consumer sentiment may serve as a forward-looking indicator of exchange shifts, and recent months have brought unusually unstable sentiment movements as the stock market swung lower in winter and summer.

Warnings about the recession often lead to stock sales, and in turn, sales sales may cause investors to fear that the economy will collapse. A stronger connection between market movements and sentiment can lead to worsening turns when both show worse than expected numbers.

"Sentiment fell on a month-over-month basis in both August and December along with stock market sales. This shows a more concerned consumer," they wrote.


Slow job creation

Bank of America Merrill Lynch

Unemployed consumers have historically been spending less, and although unemployment is still low, the labor market has added fewer and fewer jobs in recent months.

"In earlier episodes of declining job growth, there tended to be a similar decline in consumer spending," the analysts said.

The six-month moving average for jobs slipped to 154,000 from 234,000 in January, and future reports are projected to maintain the declining trend. The next release is likely to reflect an even more negative number when the GM strike plagued the month. Continued decline, combined with rapid wage growth, can give consumers a less rosy view of the economy and shift behavior from savings to spending.

Now read more market coverage from Markets Insider and Business Insider:

Amazon shares had weak earnings, but Barclays says it is too early to buy the rare fall

The US and China are reportedly close to concluding portions of a trade agreement

Facebook launches a dedicated news tab on Friday and will pay some publishers $ 3 million a year to participate – here's everything we know



Source link