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Insight of the Day: Watch What Consumers Do, Not How They Feel

Findings:

  • Consumer spending, a major driver of economic growth, is showing signs of slowing down.

  • Excess savings accumulated during the pandemic have been depleted.

  • Higher interest rates are discouraging borrowing and making debt management more challenging.

  • The labor market is cooling off, with unemployment rising and quit rates falling.

Key Takeaway:

The US economy faces a potential slowdown as the factors that fueled consumer spending in recent years—pandemic savings and a hot labor market—are fading.

Trend:

The trend indicates a shift from a period of robust consumer spending supported by excess savings and a strong labor market to a period of greater caution and reliance on current income for spending.

Conclusions:

  • The economic outlook is uncertain as consumer spending, the main engine of growth, loses momentum.

  • The Federal Reserve faces a delicate balancing act between curbing inflation and preventing a sharp economic downturn.

  • The labor market's trajectory will be a key indicator of the economy's overall health.

Implications for Brands:

  • Prepare for Slower Growth: Brands should adjust their strategies to anticipate a period of slower economic growth and potentially reduced consumer spending.

  • Focus on Value: Consumers are becoming more price-sensitive as their purchasing power weakens, so brands should emphasize value and affordability.

  • Target Specific Needs: Brands should tailor their marketing and product offerings to address the specific needs and concerns of consumers, such as financial security and value for money.

  • Monitor Consumer Sentiment: Brands should closely monitor consumer sentiment and spending patterns to adapt their strategies as the economic situation evolves.

  • Financial Prudence: Brands should exercise financial prudence and maintain strong balance sheets to navigate potential economic headwinds.

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