Rising consumer prices, rising unemployment and slowing the economy are indications of stagflation. This is an ugly scenario unfolding right in front of our eyes. If people have to work more to get fewer people. And that’s if they don’t lose their job.
The Federal Reserve’s preferred inflation indicator, Personal Consumption Expense (PCE) Price Index, showed that consumer prices have risen at an annual rate recently 2.5% February. Excluding food and energy, the PCE price index increased at an annual rate of 2.8%.
Notably, the latest PCE price index does not include price increases from Trump’s tariffs. These prices are approaching. Furthermore, the additional costs of tariffs on the release date almost certainly increase consumer price inflation.
For example, all products made in China are subject to 54% customs duties. So you’ll pay more if you shop at Walmart, Target, or other stores that stock items from China on your shelves.
Of course, consumer prices always come at their worst. And this time is no exception. Consumers are currently tapped out.
Specifically, consumer spending just increased 0.4% February. Combined with a 0.3% drop in January, this marked the weakest two-month stretch since the 2020 coronavirus blunder.
Consumer expenditure accounts for more than two-thirds of economic activity. As consumer spending slows, so does the economy and the unemployment rate. Consumer spending continues to decline as few people work and earn income. Thus, a self-reinforcement cycle of slowing or decreasing growth and rising unemployment is established.
This is the fate awaits American workers and consumers. But that shouldn’t be a surprise…
Serious delinquent
American consumers have grown to the largest for over a year. In fact, investigations into which more than 1,000 Americans have been released Bank Rate It turns out that 37% of them have had to soak up emergency savings over the past year. Of those, 80% spent money on essential expenses. This includes paying monthly bills and purchasing food, water and household items.
By definition, emergency savings are due to emergencies. Something like repairing a blown head gasket. Or medical costs for broken arms. Alternatively, replace the fridge on top of the Fritz. These are the types of unexpected costs where emergency savings are commonly used.
Using emergency savings on your daily bills and buying basics like food and water is to show that something is not right. Another sign is a huge number of credit cards that are serious delinquent, defined as delayed payments of more than 90 days. Now they are usually at levels that reach during recessions.
Americans now keep records, as reported by the New York Fed $1.2 trillion Credit card debt. And in the fourth quarter of 2024, we will share credit card balances that are delinquent hits of more than 90 days. 11.35%. This has been the highest credit card delinquency rate since late 2011.
In other words, these credit card holders don’t even pay a monthly minimum. They’re not paying anything. In doing so, they are destroying their credit ratings and ability to borrow in the future.
Increased consumer prices, increased layoffs, and credit card defaults are rough storylines. They all refer to stagflation and a surge in recession.
#RecessionIndicator
Recently Goldman Sachs I raised that prediction The US recession could reach 35%. The basis for investment banks was a tax-like effect on consumers resulting from higher tariffs. Nothing JpMorgan has Increased the odds For many of the same reasons, 40% of the recession.
Perhaps these forecasts do not assess the risk of a recession. At this point, the odds should be well above 35% or 40%. In reality, the US economy may already be in a recession.
The latest forecasts from 14 economists surveyed by CNBC will make GDP growth in the first quarter 0.3%. It’s barely stepping on the water. And this was before the tariffs began on Trump’s release date.
When these tariffs and tariff-related uncertainty costs have the opportunity to filter their methods through prices and supply chains, the economy will undoubtedly fall into contraction. After this happened for the second quarter in a row, the recession becomes official.
In the meantime, Gen Z and Young Millennials have posted what appears to be observable recession indicators on social media. These posts are tagged with #RecessionIndicator. From music to fashion to tip culture, everything is posted as evidence of the recession.
“We’re starting fresh from Frocks in District 12.” I made a comment One Gen Z social media content creator. “It’s made of lovely rough materials… you don’t need to wash it that often. It’s the core of the recession.”
If you think of Gen Z as simple dresses and the core of the recession, what do they think of a stable meal of rice and beans?
When mom and dad’s bank breaks
Without a doubt, this economic environment is particularly cruel for young adults. Research from savings.com Recently, it has been found that half of parents with adult children regularly support their grown offspring. The average support per adult child from Bank of Mom & Dad is $1,474 per month, or about $18,000 per year.
Parents are sacrificing retirement savings to buy groceries and pay adult children mobile bills and rent and mortgages. By Savings.com:
“The financial tensions supporting grown children are particularly pressing for parents preparing nest eggs. Parents who still have a workforce donate more than twice as much money to adult children each month than their retirement account.”
What happens when moms and dads retire or run out of money to support an adult child? Do children somehow become independent through beneficial employment? Do they return their parents’ favor after sucking up their retirement savings?
These are the types of offensive questions that you must ask when society declines. When things break, they will no longer work along traditional lines. Established norms and expectations are shattered.
Parents are asked to support adult children until Mom and Dad’s bank breaks. Similarly, credit card defaults are stacked. And ultimately, if enough people can’t pay the debt, the entire debt structure collapses. The bank fails. Bank assets are vaporized.
To reverse the course, the US economy needs lower consumer prices and higher wage jobs. This allows workers and consumers to maintain a reasonable lifestyle without having to own debt or relying on mom and dad banks. Trump believes tariffs are the answer.
If that’s the case.
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From the heart,
Mn Gordon
For economic prism
Mom and Dad’s banks are back when they broke into economic prism
