Sometimes, all it takes is one or two charts. Without further ado, see below
1. What has happened to disposable income for Americans (basically, gross income after all taxes) and the price of everything (inflation). I'm showing only the last 4 months because COVID cash handouts muddle the picture. Inflation is soaring, income is not.
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Annual Change In Disposable Income (blue) And Inflation (red)
2. Surely, you may think, Americans still have plenty of money left over from the Biden/Powell shower of free cash during 2020-21. But no, they most definitely do not. Savings balances are the lowest in 8 years in absolute dollar terms ($945 billion as of 2Q22) and the lowest in 12 years as a percentage of current GDP (3.88%).
Personal Savings As A Percentage Of GDP
With prices soaring for essentials, incomes rising at a much slower paces and not much money in the bank, it's pretty easy to predict a consumer-driven recession in the immediate future, after the current spate of "revenge" spending post-COVID (eg travel) is over.
It isn't rocket science...
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