CFO Intelligence Magazine – Spring/Summer 2024
Tani Fukui
Macroeconomist, Director, MetLife Investement Management
In 2023, consumers surprised everyone with their incredibly strong spending. How will they spend in 2024? I see them likely to pare back, with the middle- and low-wage earners slowing down the most. On the positive side, as markets anticipate Fed funds rate decreases, mortgage rates are likely to come down and some people are finally going to be able to buy a house – together with all the furnishings and lawn maintenance equipment that they will need to inhabit it. On the negative side, increasing labor market softness could sow deeper anxiety for many and put the brake on discretionary spending.
NOT AS STRONG AS THEY USED TO BE
Consumers spend when they feel secure about their stream of future earnings. They also spend when they have a wad of cash in the bank or plenty of unused credit.
That first condition is holding, at least for now. With low jobless rates and decelerating inflation, people still feel assured about their ability to buy what they need. Even if the unemployment rate increases somewhat, the labor market would still be strong enough to support a lot of spending.
The second condition is likely to be weaker going into 2024. Consumers have spent down their pandemic savings, and have become more indebted and with less ability to get credit.