An expansion of the food stamps program ended this year. Extended unemployment aid ended in September 2021. So the central bank has signaled that more rate hike are likely this year.Īt the same time, the government has been phasing out pandemic relief. Yet that’s still twice the Fed’s 2% target. From a year-over-year peak of 9.1% in June 2022, consumer price inflation fell to 4% in May. Higher borrowing costs have had the intended effect of slowing the economy and price acceleration. Since then, it’s raised its key rate 10 times. In response, the Fed began jacking up its benchmark short-term rate in March 2022. Inflation surged last year to heights not seen since the early 1980s. Massive government aid fueled a rebound of surprising speed, strength and resilience.īut it came at a price: Surging demand from consumers overwhelmed the world’s factories, ports and freight yards, resulting in delays, shortages - and much higher prices. A deep recession engulfed the economy in March and April that year. The economy has endured a wild ride since COVID hit in early 2020. The dent to spending would have been half as much, they say, if the Supreme Court had allowed the Biden debt forgiveness program to proceed. Jan Hatzius, chief economist at Goldman Sachs, and his colleagues say they expect the end of the student loan moratorium to impose a “modest drag’’ on the economy, shaving 0.2% off growth in consumer spending this year. (Walmart is also the nation’s largest grocer.)ĭollar stores and other discounters might even benefit if more financially squeezed consumers turn to bargain-hunting. The largest retailer, Walmart, is thought to be insulated from major damage because of its grocery business. The biggest blow, they say, will likely be absorbed by online commerce and mail-order companies and by restaurants and bars.Īmong the individual companies that could be hurt, according to the Deutsche Bank analysis, are Macy’s, Target and Kohl’s. The suspension of loan payments “had given people a bit more money in the pocket, and they’ve gone out and they’ve spent that money,’’ said Neil Saunders, managing director of the GlobalData Retail consultancy.ĭeutsche Bank analysts who follow the retail industry estimate that the resumption of the loan payments could shrink consumer spending by $14 billion a month, or an average of $305 per borrower. Consumers have had the financial wherewithal to load up Amazon shopping carts, go out for dinner and buy everything from lawn furniture to new refrigerators, in part because the government spent around $5 trillion since 2020 to cushion the economic damage from COVID-19.īut those pandemic relief programs, including the student loan moratorium, are ending and adding to the obstacles the economy is facing. The continued willingness of consumers to spend has kept the economy humming despite more than a year of dramatically rising interest rates. Any pain instead will likely be concentrated in a few industries, notably e-commerce companies, bars and restaurants and some major retailers.Įven if all that won’t be enough to weaken overall economic growth, the shift in spending by many young adults could inject further uncertainty into an economy already best by uncertainties, from whether the Fed will manage to tame inflation and halt its interest rate hikes to whether a recession is destined to strike by next year, as many economists still fear. Their pullback in spending on goods and services won’t likely make a serious dent in the $26 trillion U.S. The restart of those payments will force many people to start paying hundreds of dollars in loans each month - money they had been spending elsewhere for the past three years. The court ruled that the plan exceeded the government’s authority. The Biden plan would have canceled up to $20,000 in federal student loans for 43 million borrowers 20 million would have had their loans erased entirely. Though many hoped their loans might at least be lightened, the Supreme Court last week struck down a Biden administration plan that would have given millions of people some relief from the return of the loan payments.
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