Consumer spending accounts for about two-thirds of U.S. gross domestic product (GDP), so it plays an outsized role in driving economic growth or slowing it down.1 For the last 18 months, U.S. consumers have kept the economy strong despite high inflation and rising interest rates. The question now is whether consumers can maintain this momentum through the holiday season and into 2024.
In considering this, it's important to keep in mind that the Federal Reserve is trying to cool spending through higher interest rates, in their effort to combat inflation. So a moderate slowdown in spending is not necessarily bad for the economy. But throwing it into full reverse could lead to a recession, making it a delicate balance.
