Goldman Sachs’ Jan Hatzius lays out three reasons the recovery will sputter out. Specifically they expect consumer spending growth to fall from a current rate of around 3.25% to 1-2%:
- The recent strength in consumer income is inconsistent with real household income. Any improvement in the labour market will be offset by the end of the stimulus.
- The savings rate still hasn’t risen to historical averages, so that represents a coming drag.
- Consumer confidence data doesn’t match the current brisk rate of spending. Instead it suggests spending growth of merely 1-2%.