Consumer spending helped carry the U.S. economy past recession forecasts in 2023 and has remained resilient so far this year even in the face of continued high inflation and interest rates that remain at two-decade highs.
The pace of spending has started to slow, however, and economists expect it to moderate further in the back half of 2024. Lower income shoppers are likely to pull back the most, particularly when it comes to discretionary spending, while higher-income spenders are expected to keep the economy moving forward, economists say.
A slowdown in real disposable income growth, along with a cooling labor market, higher tax payments and persistent inflation, helped drive spending lower in the first quarter, according to Oxford Economics, which forecasts that consumer spending will continue its gradual slowdown in the second half of the year.
“The weaker personal income and spending numbers, together with the downward revisions to consumption growth for the first quarter, have raised concerns that the core …