Crypto News: Economics Daily: Spending fatigue

I'm Chris Anstey, a senior economics editor in Boston and today I'm looking at Katia Dmitrieva's reporting on the US consumer. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X (formerly known as Twitter) via @economics. And if you aren't yet signed up to receive this newsletter, you can do so here.

Federal Reserve officials shifted their tone on the timing of rate cuts.
India's economy grew at a much faster pace than analysts predicted.
Factory activity in Asia stayed subdued in November.

For years, Americans have been on a massive spending binge, first on goods — everything from cars and bikes to electronics while they were living, studying and working at home — then on services they were unable to enjoy during pandemic lockdowns.

It was propelled in part by unprecedented federal income support, and then an historically rapid rebound in the job market. And the boom has lasted far longer than most had anticipated, in the face of Federal Reserve interest-rate hikes. But now the wave has crested.

Signs are piling up — in recent data, in warnings from top retailers such as Walmart and in anecdotes from local businesses across the country — that American households are starting to pull back.

"The household disposable income side isn't looking great — jobs growth is slowing, wages are slowing. Inflation is slowing, too, but won't lift household finances in a meaningful way," said James Knightley, chief international economist at ING. "We're seeing a weaker consumer, and that's significant."

Monthly government data on consumer spending published Thursday showed a cutback in discretionary categories like cars, furniture and gym memberships to begin the fourth quarter.

Holiday shopping was also less festive, with Black Friday spending down at a number of the country's largest chains and a record amount of online purchases made using buy-now-pay-later schemes on Cyber Monday.

The Fed's latest economic survey, known as the Beige Book, added to signs of a turn in the economy:

Philadelphia: "Electric vehicles were accumulating on dealer lots."
Dallas: "The pace of hiring decelerated broadly, and some freight carriers, high-tech and manufacturing companies reported layoffs."
Kansas City: Consumers are increasingly likely to "share a roof and share meals" to manage budget challenges. Restaurateurs cited drops in revenue as more customers split dishes and skipped expensive items.

"Consumer spending accounts for roughly two-thirds of GDP, so less shopping will mean slower economic growth," Atlanta Fed President Raphael Bostic said Wednesday.

A year after President Emmanuel Macron received a warning that France's credit status faced closer scrutiny, the possibility of a humbling downgrade is looming ever larger.
President Xi Jinping appears set to postpone a party meeting held every five years to chart his nation's long-term reform agenda, the latest example of the Chinese leader disregarding decades-old norms.
Japan's businesses increased investment modestly over the summer as profits continued to grow in a sign of resilience even as the economy shrank.
Treasury Secretary Janet Yellen reiterated that the US needs to reduce over-reliance on China in key supply chains as she touted major investments in US productive capacity in a pitch for Bidenomics Thursday.
Italy's economy eked out some growth in the third quarter after all instead of the stagnation originally estimated by the country's national statistics institute.
Argentina won't join the China-led BRICS bloc during Javier Milei's presidency, his incoming top diplomat said, underscoring the significant foreign policy shift his administration plans once in office.

Forget about the "higher forever" doom-and-gloom about global interest rates. At least, that's according to the analysis of Bank of England staff in a new study.

Sluggish productivity gains and longer life spans will drive the long-run neutral rate back down to the historically low levels that prevailed in the years leading up to the pandemic, the BOE study showed. Longer lives mean bigger savings to finance longer retirements. And weak productivity means limited returns on investment, reducing demand for capital.

"Without a reversal in these trends, or new forces emerging to offset them, long-run Global R* appears likely to remain low." the authors wrote. (Economists refer to the neutral rate as R-Star, or R* — the theoretical benchmark rate setting that neither spurs nor slows the economy.)

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