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The 2023 holiday season proved to be robust for US consumer spending, with consumer confidence rising. However, with many economic headwinds to weather in 2024, questions arise around the status of consumer spending going forward.
Apollo Global Management Chief Economist Torsten Slok joins Yahoo Finance to discuss the current economic environment and lay out the possible risks to the consumer spending.
Slok explains that consumers are beginning to run out of excess savings dating back decreased spending from the pandemic, and the combination of mortgage rates and resuming of student loans could be a significant blow to consumer spending.
"At the same time, because of the Fed deciding to turn more dovish and the market interpreting that in a more dovish way, that is now becoming a bit more of a tailwind, so we don't anticipate that this will create a sharp slowdown," Slok says. "But, it is very critical that excess savings running out will begin to give a path for consumption where we are going to see a slower growth rate over the next several quarters. That should be a softer landing for the US economy overall."
Editor's note: Apollo Global Management owns a majority stake in Yahoo, the parent company of Yahoo Finance.
Click here to watch the full interview on the Yahoo Finance YouTube page or you can watch this full episode of Yahoo Finance Live here.
Video Transcript
- She talks to another key thing we have to think about here is the consumer, who's proven remarkably resilient. And they have that labor market is sturdy. As you look ahead now, Torsten, what do you see for the consumer? Because some folks say listen, on the one hand, they see a labor market that's cooling. It's not crashing but cooling. They see, they talk about dwindling savings. On the other hand, also resumption of student loan payments. How do you add all that up? Where are we with the consumer?
TORSTEN SLOK: Well, I think that there are three factors impacting consumers at the moment. The first one is that consumers had a lot of excess savings after the pandemic. It just happened to be the case that consumers saved a lot of money after the pandemic because of stimulus checks, unemployment benefits, and because also we were not traveling, we're not going to restaurants, we're not staying in hotels, not flying on airplanes.
That meant that households, by late 2021, had about $2 trillion in excess savings that they would otherwise not have had. And running down those savings have taken quite some time, and that's what we're getting to the tail end of that. A lot of Fed papers that are showing we're getting to the end of that consumption boom that we have had as a result of these excess savings. So that tailwind is running out of steam over the next several quarters, exactly as you're saying.