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Boosting Economic Growth: The Role of Consumer Spending

As we enter the latter half of 2024, it's essential to examine the state of consumer spending and its impact on economic growth. Despite elevated inflation and higher interest rates, US consumer spending has held up remarkably well this year. However, as new student loan repayment requirements take effect in October, compensation growth slows down, and pandemic savings dwindle, many consumers will feel the pinch.

According to our forecast, overall consumer spending growth is expected to slow towards yearend before contracting in Q1 2024 and Q2 2024. This trend cannot continue indefinitely, as household debt rises rapidly. The Conference Board predicts that US economic growth will buckle under mounting headwinds early next year, leading to a short and shallow recession.

The key factors driving this outlook include elevated inflation, high interest rates, dissipating pandemic savings, mounting consumer debt, lower government spending, and the resumption of mandatory student loan repayments. As we move forward, it's crucial for policymakers and businesses to monitor these trends closely and adapt accordingly.

By understanding the intricacies of consumer spending and its impact on economic growth, we can better navigate the challenges ahead and work towards a more stable and prosperous future.

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