What does this mean to you and me?
Much of the dollar gains in sales were related to inflationary pressure. Prices rise, and so do the sales figures. But whereas normally people purchase fewer items when prices rise, that has not occurred this time. Savings remain at relative highs, therefore disposable income is also there to spend.
Consumer spending was up 0.9% in April, which was the fourth month in a row that saw increases. A lot of the increase was focused on greater consumer expenditures on dining out, cars, and apparel.
But with the potential for a recession, one of the major worries is the housing market, which fuels much of the economy: Home Depot, Target, and Walmart all gain from the sales of new and existing homes from furniture, appliances, lawn care, etc.
If the U.S. economy goes into recession, and home prices drop, that could be good. Inventory is low right now, so even a large drop in buyer demand probably won’t result in a housing market crash. In those circumstances, it may afford financially secure first-time home buyers the opportunity to own property.
What will happen? No crystal ball, but homeowners are sitting on record levels of home equity. That means even in a recession, prices shouldn’t fall to levels that would wipe out that equity. With inventory so low, a recession in the near term might not affect home values much at all.
The stock market is close to a bear market (a 20% drop in the averages). Inflation is at a 40-year high. Major retailers reported decent comparable sales numbers but fell short on earnings. People are spending, though, and are, as a whole, sitting on quite a bit of cash. So what gives?
Fears of a recession are peaking, but are those fears justified? The Federal Reserve issued a hawkish report last Tuesday (5/17/2022) and said that a recession is possible in 2023.