Binge

The consumer continues to astound. To spend, to consume, to buy more and more stuff at a time when savings are being run down and confidence is supposedly fast approaching the bottom of bottle of very neat liquor. From Lowe’s to Abercrombie through to Best Buy, American Eagle and Burlington Coats the message is the same. The tills are ringing hot. The jobs market is tight, wages are going up – albeit not in step with the cost of a Thanksgiving dinner – and consumer spending is on track to holler 4% higher in Q4. The thump-thump out of retail is going to put some serious heat into the quarterly GDP number, hence the Atlanta FEDs model gapping up. Perhaps it’s a sign of post-COVID exuberance, as the first holiday season free of masks and hand gel, lays the ground for a temporary what-the-hell spending spree. Fears that it’s a final flurry are fanned by the fact that much of the spending is being loaded on to credit cards; cards that charge rates that are shooting north of an eye-popping 16%. Delinquencies are likely to rise come the chill of a 2023 when low-end consumers who have maxed out, start to feel the nip-nip of a corporate recession. That said analysts point to a near $1.2 trillion pile of personal savings, so whilst they are being drawn down, there is plenty left on account. Watch auto loans, where delinquency rates are starting to tick higher; so too the share prices of the likes of Affirm Holdings and Sezzle. Consumer payment businesses that will be first to see signs of the hangover post a big festive binge. A recession may be incoming, but it appears the consumer has not yet picked up the mail.