The recession fears are real. A recession isn’t.
Emotions and facts often compete for investors’ attention. The friction between the two drives short-term price changes.
The economy will fall into a recession. The business cycle ebbs and flows. What worries investors is when will the contraction come and how bad will it be.
It’s impossible, and impractical, to know with certainty. That’s why investors are on edge examining all kinds of signals hoping to discern a demarcation point for the economy.
An inverted yield curve, when short-term interest rates are higher than long-term rates, a pullback in business investment, a president tweet taunting a trade partner — all have been blamed for adding to a chorus of recessionary concerns.
Yet, don’t forget the American consumer. After all, they are responsible for 70 percent of economic activity.
President Donald Trump recognized this when he delayed instituting more tariffs on consumer goods made in Chinese until mid-December. “We’re doing this for Christmas season,” he said when he made the announcement earlier this month.
New data on the health of consumers are out in the week ahead. Personal income and spending figures, and the Federal Reserve’s favored inflation gauge are the most important. They will give investors insight into the earnings power, spending interest and prices consumers are experiencing.
Mark Zandi, Moody’s chief economist, told CNN, “If American households are out spending, the economy will remain intact.”
Low unemployment, low inflation and low interest rates have helped fuel consumer spending. They are key ingredients shaping consumer economic attitudes. The week ahead also will bring important monthly updates on consumer confidence.
Investment markets have been working hard trying to anticipate a recession. So far, though, consumers keep participating in the economy expansion.
Tom Hudson hosts “The Sunshine Economy” on WLRN-FM, where he is the vice president of news. Twitter: @HudsonsView