US consumers are keeping the economy from sinking, amid the fear of recession looming over the nation. With the on-going trade war with China, slump in the manufacturing sector, tariff issues with European Union, and falling stocks, the US economy is slowly slipping in the danger zone. But the US consumer spending, which drives almost 70 per cent of the economy is keeping it afloat. Besides, the strong labor market, and growing wages are adding to its strength.
According to Goldman Sachs’ US equity strategist, David Kostin, US consumer confidence is nearly a 20-year high, which would prove to be helpful for the economy.
What boosted this confidence further was Trump’s recent announcement of delaying the additional 10% tariffs on the remaining Chinese imports accounting for about $300 billion. It can see seen as an early Christmas present to US consumers as US tariffs on Chinese imports have been impacting their consumption ability. Trump couldn’t afford to take chances with consumer spending as holiday season is just around the corner.
In a recent interview, Goldman Sachs’ CEO, David Solomon, told CNN, “I think the economy’s doing fine. There are things that are getting added to the equation. In particular, the trade war with China that is having an impact, it’s having an impact on growth. I don’t think that impact is significant yet, but we’re watching that very very carefully.”
As per the data revealed by US Commerce Department, the retail sales went up by 0.7 per cent in July, right at the beginning the third quarter. The more than expect jump in sales driven by online shopping including Amazon’s 48-hour prime “day” offer, showed surge in consumer confidence.
US President Donald Trump said on Thursday, “The economy is phenomenal. We had a couple of bad days but we are going to have some very good days because we had to take on China.”
Trump also tweeted “The United States is now, by far, the Biggest, Strongest and Most Powerful Economy in the World, it is not even close! As others falter, we will only get stronger. Consumers are in the best shape ever, plenty of cash.”
Besides consumer market, even Wall Street stocks started to show sign of slight recovery after witnessing the worst drop of the year, earlier this month,
To put it simply one can say that US economy growth is declining but not in recession. The Atlanta Fed’s GDPNow predicted that US economy would grow at the rate of 1.9 per cent in its third quarter, which is slightly below 2.1 per cent, its growth rate from April to June. But all it doesn’t mean US economy is far from danger. US needs to move ahead very carefully.
Also, needless to say that it would be good for both US and global financial market if its trade battle with China could be put to an end. In a speech on Thursday, Trump told reporters that September trade talks with China are ‘still on’, after speculations of talks being cancelled. It appears to be a positive sign. But a lot depends on how things go from there on.