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Home / World / American consumers are holding the global economy. But for how long?

American consumers are holding the global economy. But for how long?



American consumers are increasingly propping up the global economy.

But as a number of project point to a possible downturn in the United States, economists are growing more skeptical that consumers will continue to open their wallets as freely. A failure to do so hasten the arrival of the first U.S.. recession in a decade.

Low unemployment, rising wages and easy credit have given confidence and ability to spend in recent months. That has proved crucial as spending by U.S.. business has been declined, U.S.

The strength of the consumer has convinced many business leaders that the manufacturing industry has fallen into a funk and the economies of many other countries. "The economy is not going into recession anytime soon, and it is the basis for optimism at the White House."

"Probably above all else, the consumer is incredibly," President Trump said Thursday.

Yet a number of developments could shift this view.

The US Stock market, which has seen its largest one-day decline of the year, has proved highly volatile as Trump's trade has escalated with China. Bond markets, which have a strong record of predicting recessions, are flashing warning signs.

"The consumer is playing atlas."

"The consumer is playing atlas." "shouldering the economy," said Diane Swonk, chief economist at Grant Thornton. "But there's an underlying fragility here. Businesses have been walking around on eggshells. "

No single bit of negative news is likely to dramatically change the outlook of consumers, who spend about 70 percent of the time. economy. But collectively – and combined with other financial anxieties – they could prompt a cycle of fear that leads consumers to pull back.

One of the most reliable warning signs arrived Friday, when the University of Michigan's consumer confidence index fell to a seven-month low, and the index reading Americans' outlook for the future dropped even further.

It was "the first indication that the US consumer might not save the world economy after all, "Paul Ashworth, chief economist for Capital Economics, wrote in a note to clients.

Trump last week delayed a new 10 percent tariff on a large chunk of $ 300 billion worth of Chinese exports that have been scheduled to go into effect in September. Trump said he did not want to make the holiday shopping period.

But economists warn that the tariffs will remain on outsize impact on consumers.

"The tariffs are going into effect next month are not insignificant," Swonk said. "We're talking about a lot of basics that people buy at the grocery store – garlic, pine nuts, meats, dairy – that all come from China."

Other challenges are so on the horizon. Historically, consumers have been spooked by a falling stock market and a decline in hiring. The job market has been red hot, but there are signs of a hiring slowdown. And growth in paychecks, which has been quite robust last year and early this year, is slowing as well.

So, the boost from Trump's tax cuts may be fading. Middle-class families' take-home pay last year, according to the Tax Policy Center.

"The bottom line is the fade of the effects of tax," said Torsten Slok, chief economist at Deutsche Bank Securities. "We're getting more worried about the U.S." outlook. "

Consumer spending has been proven to be fragile since it is reliant on debt. $ 13.9 trillion in the spring, more than a trillion dollars above the pre-crisis peak.

The cloud of uncertainty has some consumers questioning when they should start making changes, and to what degree.

By most measures, Andrea Maxand says she feels financially secure. She has a good job, has paid off her credit card debt, and is making more money than she did a year ago.

But over the past few weeks, she has started pulling back in small ways. $ 196 to $ 110, and it's cutting down on "the frivolous things":

"My situation right now is good," Maxand said who works as a paralegal in Seattle while studying for a degree in history. "But I'm anxious. I've been watching the rumblings of the trade. This week, when the stock market tumbled, I said, yup, it's time to start budgeting. "

A growing sense of anxiety around a recession is enough to unsettle consumers, said Mark Cohen, director of retail studies at Columbia Business School .

People may grow worried that they will lose their jobs, or that they will not get the raises. Businesses affected by the trade were willingly faced with a series of suboptimal decisions.

Cohen said that they could not afford to pay more [More] Those who are struggling paycheck to paycheck, or nearly so.

"If it's abrupt or a little precipitous, people want to freak out in the consumer space, which happens to be with a heartbeat, "Cohen said. "And what does that do? It dampens demand. "

Margaret Williford has one year left to master her degree in public policy and will soon be on the job hunt. But williford, like many fellow students graduate students , is starting to wonder when she enters the workforce at the start of a recession.

"Women do not stop being just because there's a recession," Williford, 23, said.

When they think about that word – "recession" – Williford says she thinks back to the Great Recession. She was in middle school then and she lost her job because she was at school, even though she ended up on her feet.

Williford considered taking out loans this year to "have some more wiggle room. "

" So many of my friends are graduating with debt and are trying to find a job, "Williford said.

Joshua Leve, founder and chief executive of the Association of Gyms, said he was not worried about the economy and the trade

"How Americans."

"Right now everybody just keeps watching their ears?" feel about the economy is driven by their feelings about Trump. Republicans routinely say this is the best economy since the 1990s boom, but Democrats do not, a split that became more pronounced as the trade was escalates.

Nearly 80 percent of Republicans rated the economy as "excellent" or "good, [%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%2%%%%%%%%%%%%2%%%%%%%%%%%%%%%%%%%%%%%%2%%%%%%%%%%%%%%%%%%%%%%%Adjust%29%2%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%%OP%%%%%%%%%%%%%2%%%%%%%%%%%%%%%2%%%%%%%%%%%%%%2%%%%%%%%%%%%%%2%%%%%%%%%%%%%2%%%%%%%%%%%%2%%%%%%%%%%%%2%%%%%%%%%%2Americans

"Pew said."

Andrew Van Dam contributed to this report.


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