U.S. households have been winding down their savings and adding to their debts. This has put many households in a weaker position than the start of the year. Many have feared that the economy has slowed down and just recently those fears were brought back into the spotlight after Silicon Valley Bank was taken over by regulators just last week. The events have been compared to the 2008 financial crisis as this has been the largest US bank failure since 2008. This will likely cause banks to tighten up on lending which will put strain on consumers which will trickle down to people spending less and saving more. This will cause a decline in sales for firms. Those surveyed by Bloomberg put the odds of a recession happening at 60%. Many factors play into this percentage like inflation has hit its highest levels in decades, this has been able to be masked because consumers have been mostly able to keep up with spending.
This month has been an eye opening time for the U.S. After Silicon Bank was taken over many began to realize that the chances of a recession is more possible than what was thought. When labor markets start to show signs of cooling that will be a signal that household incomes have weakened.
2 comments:
Overall, great post! I think it will be interesting to see how this plays out in terms of the United States and for the lower class.
This post was very interesting. It surprises me that today more and more people are choosing to spend and not save whereas in the past most people saved so they can spend that money later. For our generation that means that we should be saving instead of spending money.
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