American households spent a record amount on shopping days Black Friday and Cyber Monday. According to macroeconomist Edin Mujakic, a total of $38 billion is spent in one weekend in the United States. The fact that American households dug deep into their pockets during the discount parade gives Mujaghi a good feeling. As a result, I think there is a high chance that the US will experience the famous soft landing.
What are the chances of a soft landing?
A soft landing means that inflation falls enough without the economy entering a recession. It’s a great combination, but I also have my doubts. This is because history teaches me that we have often seen a soft landing coming, but it actually only happened once.
‘Household consumption largely determines the economy’
However, I think it’s possible now because these figures show that consumers in the US are obviously willing to spend a lot of money. Household consumption largely determines the economy in the US and the Netherlands, so it all fits into the story of optimism.
But hope can also be disappointment deferred, right?
In fact, some efforts should be made. If you look behind the numbers, you will see many remarkable things. First, companies have offered more discounts than usual, which is something to take into account. This indicates that companies are determined to attract people to spend money.
In addition, many Americans put off buying items they actually wanted to buy earlier in the hopes of discounts on Black Friday and Cyber Monday. But one of the ominous signs behind the big numbers is that many Americans are buying things on credit.
Why is that a bad thing?
Regional Bank of New York researched which individuals mainly use the repayment option. These are mainly people who really don’t have any money, or who have bad credit rating, meaning they can’t get a credit card or have a high interest rate. Therefore, we are talking about households that in principle cannot afford a high debt burden, which may cause problems if they have to pay the amount next year.
‘The most positive sign is that people are spending money’
Looking ahead, we see that in 2024 American families are already facing many problems. The labor market will then be less heated, causing unemployment to rise. In addition, wage growth is slowing and many families are starting to pay off their student loans starting in October. On average, it’s more than $500 a month, so it can’t be spent. This is bad for the US economy because it runs on household consumption.
Any more reason to believe in that soft landing?
A very positive signal is that people are spending money. So, I understand the feeling of hope that we can enjoy a soft landing, and I will celebrate if next year decides this is it. But given the history and these developments, I still believe it’s a matter of hope. I sincerely believe that I am wrong in this matter.