Consumer Confidence Defies Recession Fears: Key Data Point Reveals Steady Spending

A slowdown in consumption in March appears to have unwound in April, according to the latest weekly payment card transactions data from the Bureau of Economic Analysis (BEA), indicating consumers are shrugging off the chance of a recession.

What Happened: Card spending advanced by 15.5% for the week ending April 18, with the four-week moving average running at 9.4%, according to Renmac, which cited BEA data. Despite the encouraging figures, concerns about the possibility of a recession in the U.S. continue to rise.

The probability of a recession in the U.S. by March 2024 is currently at 57.77%, according to Estrella and Mishkin Indicators, compared to the long-term average of 13.99%.

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Analysts at Goldman Sachs recently raised their forecast for the likelihood of a recession in the next 12 months to 35%, citing the recent collapse of Silicon Valley Bank and concerns about its impact on the broader banking sector.

The data suggests that consumers are not significantly altering their spending habits despite growing concerns about the state of the economy. It could be due to various factors, including pent-up demand, or simply a belief by the public that the economy will rebound quickly.

However, with the rising anticipation of a recession, the trend may not continue for much longer.

Federal Reserve officials are currently indicating that they plan to increase interest rates by 25 basis points next month, followed by a potential pause. This comes amid the recent banking crisis that tightened lending standards.

Not So Fast: Analysts suggested that the Fed's tightening policy would’ve led to a reduction in spending, but the BEA data indicates otherwise.

Fed officials will be analyzing the data issued by the BEA, and depending on what the central bank concludes about consumer behavior, investors may not see a rate hike pause in May.

Read next: Cathie Wood And Elon Musk Renew Plea For Fed To Slash Rates, Point To Plummeting Real Economy