Despite a series of interest rate hikes aimed at curbing inflation, consumers have displayed remarkable resilience.
However, recent indications suggest a shift in their spending habits.
Jack Kleinhenz, the Chief Economist of the National Retail Federation (NRF), points out that consumers are still purchasing more than they were last year. Nevertheless, there is a noticeable slowdown in spending growth as the economy stabilizes.
Kleinhenz elaborated on this observation in the August edition of NRF’s Monthly Economic Review, stating, “There are ongoing economic challenges and questions, and the pace of consumer spending growth is becoming incrementally slower.”
Over the past year, credit card debt reached a record high, while the personal savings rate declined. According to a report from the Federal Reserve Bank of New York, credit card balances for Americans soared to an all-time high of $1 trillion this year.
However, revolving debt, primarily composed of credit card balances, contracted in June, as reported by the Fed’s G.19 consumer credit report earlier this month.
Bank of America’s recent consumer checkpoint noted that after a robust start to the year, credit and debit card spending began to slow in the spring.
In July, total card spending registered only a 0.1% year-over-year increase after three consecutive months of year-over-year declines. This slight improvement was partly attributed to Fourth of July sales, Amazon Prime Day, and “Barbenheimer.”
As interest rates continue to climb, households are feeling the financial strain, leading consumers to reduce their reliance on credit cards for purchases, according to Kleinhenz. Currently, the average credit card interest rate stands at over 20%, reaching an all-time high.
NRF’s President and CEO, Matt Shay, mentioned on “Squawk Box” that spending habits are evolving. Consumers are now seeking value and focusing more on essentials, rather than discretionary purchases. He remarked, “Things have changed.”
While consumers are still in a favorable financial position and continue to spend, Shay noted that their spending patterns have shifted away from those observed 18, 12, or 24 months ago.
“A consumer spending slowdown is inevitable,” asserted Matt Schulz, Chief Credit Analyst at LendingTree. He emphasized that consumers face several significant challenges, including the impending resumption of student loan payments this fall, which will serve as a substantial test.
Schulz pointed out the uncertainty surrounding the future of card spending. It could either surge if people rely on credit cards to make ends meet or contract further if borrowers cut back on discretionary expenses such as travel and dining out.
As economists suggest a ‘soft landing’ for the economy, consumers are advised to remain vigilant and adapt to changing financial circumstances.
What will it take for the Fed to cut rates?
Leading economists anticipate a potential shift in the Federal Reserve’s monetary policy, shedding light on the timeline for an interest rate reduction.
Financial experts and analysts have closely examined economic indicators, which suggest that a change in the Fed’s stance may be on the horizon. Factors such as inflationary pressures, employment rates, and GDP growth have all been scrutinized to ascertain when the central bank might decide to cut interest rates.
The consensus among these experts is that a rate cut could occur within the next six to nine months. They point to the Federal Reserve’s commitment to maintaining a flexible approach, adjusting policies as needed to support economic stability. With inflationary concerns still looming and the labor market showing signs of recovery, the timing of a potential rate cut remains a key topic of discussion among financial circles.
The Federal Reserve’s decision on interest rates can have a profound impact on financial markets, investments, and borrowing costs. As such, investors and businesses are keeping a keen eye on developments in this regard, preparing for potential changes in their financial strategies.
Kyle Rodda from Capital.com spoke with Ticker’s Ahron Young. #featured
Bank accidentally deposits $86M into client’s account
A financial institution mistakenly deposited over $86 million into a client’s account, causing shockwaves in the banking industry.
The error came to light when the client, a small business owner, checked their account balance and discovered the astronomical sum. It is being hailed as one of the most significant banking errors in recent memory.
The client, who wishes to remain anonymous, reportedly contacted the bank immediately upon noticing the massive windfall. Bank officials were left scrambling to rectify the error, which has raised numerous questions about the institution’s internal controls and safeguards.
The client’s account, initially holding just a few thousand dollars, suddenly displayed a balance that could buy luxury yachts, mansions, and more.
The incident has prompted investigations by regulatory authorities to determine how such an egregious error occurred in the first place.
While the bank has issued an apology and assured the client that the funds will be corrected to the proper balance, it remains unclear how this mistake could have happened on such a colossal scale.
The financial institution may also face potential legal consequences for the error, as well as reputational damage that could impact its future business.
Tech giants drive global mega-cap surge amid inflation relief
Tech giants have taken the lead in propelling global mega-cap stocks to new heights.
This surge comes as a welcome relief for investors who have been closely monitoring the impact of rising inflation on the financial markets.
The tech sector, including giants like Apple, Amazon, and Microsoft, has been instrumental in driving the rally. These companies have reported robust earnings and strong growth prospects, which has boosted investor confidence. As a result, the market capitalization of these tech behemoths has reached unprecedented levels, contributing significantly to the overall rise in global mega-cap stocks.
The easing of inflationary pressures has played a pivotal role in this resurgence. Central banks’ efforts to tame inflation through monetary policy adjustments have begun to bear fruit, reassuring investors and stabilizing financial markets. As concerns over rapidly increasing prices recede, investors have become more willing to invest in mega-cap stocks, particularly in the tech sector, which has demonstrated resilience in the face of economic challenges.
Will the tech giants maintain their momentum and continue to lead the mega-cap surge, or are there potential risks on the horizon?
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