THE RECESSION IS A MYTH
By AFP
October 26, 2023
US GDP growth was 4.9 percent in the third quarter, beating analyst expectations - Copyright AFP SAUL LOEB
Beiyi SEOW
The US economy heated up more than expected in the third quarter, government data showed on Thursday, as a resilient job market helped boost consumer spending, holding off the prospect of a recession.
Analysts have raised fears of a downturn as the US central bank started lifting interest rates rapidly last year to fight inflation, but the world’s biggest economy has so far defied these predictions.
A key factor is the strong labor market, which has provided healthy wage growth, allowing consumers to keep spending even as they draw down on pandemic-era savings.
Gross domestic product growth came in at an annual rate of 4.9 percent for the July to September period, the quickest pace since late 2021, according to Commerce Department data.
The latest GDP figure is a significant bump from the second quarter’s 2.1 percent expansion, and much higher than the 4.0 percent analysts expected.
It also comes as President Joe Biden works to bolster sentiment on his handling of the economy as he seeks reelection in 2024.
“I never believed we would need a recession to bring inflation down –- and today we saw again that the American economy continues to grow even as inflation has come down,” Biden said in a statement.
He called this “a testament to the resilience of American consumers and American workers,” touting the effects of an economic agenda he dubs “Bidenomics.”
The GDP pick up reflects “accelerations in consumer spending, private inventory investment, and federal government spending” among other factors, said the Commerce Department.
– Growth to slow? –
“The US economy continued to show remarkable resilience over the summer with surprisingly robust job growth and an unexpected consumer spending spree,” said EY chief economist Gregory Daco.
“While these signs of economic strength will fuel speculations that the economy is reaccelerating, we do not expect such strong momentum will be sustained,” he told AFP.
A 4.0 percent leap in consumption propelled GDP growth — contributing 2.7 percentage points to the headline number, said Ian Shepherdson of Pantheon Macroeconomics.
But analysts expect growth to slow in the final three months this year.
“As excess savings built up during the pandemic continue to drop and wage gains decelerate, it is difficult to see how this pace of consumer spending growth can be maintained,” said economist Mike Fratantoni at the Mortgage Bankers Association.
“We are now seeing some consumer stress in the rising delinquency rates for credit cards and auto loans,” he added.
Apart from the drawdown in savings, employment gains are likely to cool while borrowing rates have risen further for consumers and businesses, said Nationwide chief economist Kathy Bostjancic.
– Downturn risk –
For now, a robust growth figure adds to hope that the country can lower inflation without triggering a recession.
But if the trend persists, it could lead policymakers to consider further interest rate hikes to rein in price increases in a sustainable way.
“A year-end recession now appears unlikely,” said Michael Pearce of Oxford Economics.
But he cautioned: “There is still a strong case to expect a sharp downturn over coming quarters.”
Bostjancic expects a “mild recession” in 2024, with the largest contraction taking place in the second quarter next year.
This comes as “tighter financial and lending conditions choke off economic activity,” she said.
A separate report on Thursday showed that durable goods orders rose 4.7 percent in September, on the back of a surge in volatile transportation orders for aircraft.
By AFP
October 26, 2023
US GDP growth was 4.9 percent in the third quarter, beating analyst expectations - Copyright AFP SAUL LOEB
Beiyi SEOW
The US economy heated up more than expected in the third quarter, government data showed on Thursday, as a resilient job market helped boost consumer spending, holding off the prospect of a recession.
Analysts have raised fears of a downturn as the US central bank started lifting interest rates rapidly last year to fight inflation, but the world’s biggest economy has so far defied these predictions.
A key factor is the strong labor market, which has provided healthy wage growth, allowing consumers to keep spending even as they draw down on pandemic-era savings.
Gross domestic product growth came in at an annual rate of 4.9 percent for the July to September period, the quickest pace since late 2021, according to Commerce Department data.
The latest GDP figure is a significant bump from the second quarter’s 2.1 percent expansion, and much higher than the 4.0 percent analysts expected.
It also comes as President Joe Biden works to bolster sentiment on his handling of the economy as he seeks reelection in 2024.
“I never believed we would need a recession to bring inflation down –- and today we saw again that the American economy continues to grow even as inflation has come down,” Biden said in a statement.
He called this “a testament to the resilience of American consumers and American workers,” touting the effects of an economic agenda he dubs “Bidenomics.”
The GDP pick up reflects “accelerations in consumer spending, private inventory investment, and federal government spending” among other factors, said the Commerce Department.
– Growth to slow? –
“The US economy continued to show remarkable resilience over the summer with surprisingly robust job growth and an unexpected consumer spending spree,” said EY chief economist Gregory Daco.
“While these signs of economic strength will fuel speculations that the economy is reaccelerating, we do not expect such strong momentum will be sustained,” he told AFP.
A 4.0 percent leap in consumption propelled GDP growth — contributing 2.7 percentage points to the headline number, said Ian Shepherdson of Pantheon Macroeconomics.
But analysts expect growth to slow in the final three months this year.
“As excess savings built up during the pandemic continue to drop and wage gains decelerate, it is difficult to see how this pace of consumer spending growth can be maintained,” said economist Mike Fratantoni at the Mortgage Bankers Association.
“We are now seeing some consumer stress in the rising delinquency rates for credit cards and auto loans,” he added.
Apart from the drawdown in savings, employment gains are likely to cool while borrowing rates have risen further for consumers and businesses, said Nationwide chief economist Kathy Bostjancic.
– Downturn risk –
For now, a robust growth figure adds to hope that the country can lower inflation without triggering a recession.
But if the trend persists, it could lead policymakers to consider further interest rate hikes to rein in price increases in a sustainable way.
“A year-end recession now appears unlikely,” said Michael Pearce of Oxford Economics.
But he cautioned: “There is still a strong case to expect a sharp downturn over coming quarters.”
Bostjancic expects a “mild recession” in 2024, with the largest contraction taking place in the second quarter next year.
This comes as “tighter financial and lending conditions choke off economic activity,” she said.
A separate report on Thursday showed that durable goods orders rose 4.7 percent in September, on the back of a surge in volatile transportation orders for aircraft.
Q&A: How does financial trauma and stress impact consumers’ overall financial health?
By Dr. Tim Sandle
By Dr. Tim Sandle
DIGITAL JOURNAL
October 26, 2023
Ant operates Alipay, the world's largest digital payments platform, which boasts hundreds of millions of monthly users in China and beyond - Copyright AFP Greg Baker
While the topic of financial trauma has garnered more attention recently, it is still not a widely discussed issue. Empowering consumers to move beyond their financial trauma and become financially independent arguably has a huge benefit to the overarching economy.
To understand how the stress related to financial trauma impacts consumers overall financial wellbeing, Digital Journal spoke with Rod Griffin, senior director of consumer education and advocacy for Experian and Bruce McClary, senior vice president of membership and communication for the National Foundation for Credit Counseling.
DJ: How does financial trauma and stress impact consumers’ overall financial health?
Rod Griffin: Financial trauma can have both short- and long-term effects on a consumer’s mindset and relationship with money. In the short term, these experiences could leave consumers feeling anxious or ashamed about their financial situation, leading to overspending, under saving, or overcompensating by not spending enough, simply to avoid further financial insecurity. These behaviors can compound over time and put consumers in more dire situations, such as increased debt, the inability to access housing or having insufficient retirement savings.
Bruce McClary: Sometimes financial trauma can lead to poor financial decision making that can have a lasting impact on your financial wellbeing. For example, if you’re anxious or worried about paying your bills, you may opt for the quick fix, taking on high-interest loans or credit card debt. This can lead to a cycle of increasing debt that is difficult to escape.
It can also create a sense of scarcity or insecurity. You’re constantly worried about not having enough and falling back into financial instability that you become too risk averse. You might miss out on investment opportunities or saving for retirement, impacting your long-term financial success.
DJ: Are there any misconceptions about financial trauma and stress?
Griffin: Perhaps the biggest misconception about financial trauma is that it only affects consumers who have made poor financial decisions, but the reality is, anyone can experience financial trauma and stress. It could be the result of sudden job loss, divorce, unexpected home repairs, historical inequalities and the list goes on. In fact, Experian recently deployed a survey 2,000 U.S. consumers and found 68% of U.S. adults feel they have suffered from, or are currently suffering from financial trauma. In addition, 65% of adults admit to experiencing negative thoughts, flashbacks and anxiety when dealing with financial issues.
The other misconception is that people can easily overcome financial trauma by budgeting, saving, and investing, but financial trauma can be overwhelming, especially if you don’t know where to start. It can feel like the whole world is caving in on you. However, there are steps people experiencing financial trauma can take to lead more financially empowered lives.
McClary: There’s a misconception that financial trauma only affects an individual’s relationship with money. But it can also negatively impact an individual’s mental and physical health, personal relationships and even productivity. Constantly worrying about your financial circumstances can weigh heavily and make it difficult to be present with friends and family.
For instance, if an individual argues with their spouse about money, it can have a lasting impact on their relationship. Let’s take it a step further. If their children constantly witness the financial and emotional stress, it can impact their relationship with money. They may grow up with a fear of never having enough. Financial trauma can create a vicious cycle that impacts future generations.
DJ: What advice would you give someone experiencing financial trauma?
Griffin: Talk about your financial stress. Normalize conversations about money. The Experian survey found that more than half of respondents stated their family rarely or never spoke about finances, and the lack of discussion left 42% feeling like they never learned about financial planning; a significant obstacle to overcome if you experience financial trauma.
We have to break the cycle. Explore opportunities for financial literacy with friends and family. The more we acknowledge our financial challenges and openly discuss them with our trusted inner circle, particularly our children, the better positioned they are to learn from our experiences, and more importantly, they’ll feel more comfortable accessing financial education and resources in the future. Talking about our financial challenges also allows us to recognize we’re not alone.
McClary: Seek counsel from trusted and qualified experts. Many people are embarrassed or ashamed about their financial situation, and it can prevent them from getting help. Sometimes people feel like they’re the only one struggling but know that’s not the case. Financial struggles are common and seeking help is not a sign of weakness but rather strength. It can set an individual on the path toward financial success.
Getting one-on-one counseling can help consumers understand their financial situation better. For example, the National Foundation for Credit Counseling (NFCC) connects consumers with certified financial counselors to help them address various pain points, including debt management, homeownership, student loans or small business cash flow issues. Identifying areas of improvement and developing a plan are critical to overcoming trauma.
Beyond counsel, experts can also provide emotional support and limit the feelings of isolation when people need it most.
What steps can banks and credit unions take to help consumers overcome financial stress?
Griffin: Find ways to connect consumers with financial education tools and resources. This can go a long way. In fact, 55% of survey respondents expressed that more financial education would help alleviate their financial stressors, yet 37% of U.S. adults were unaware of where to access trustworthy information about financial literacy.
People need access to tools and resources, as well as financial knowledge to navigate the mainstream financial system. That’s how they become more engaged and active participants, and ultimately more financially successful.
Banks and credit unions are also just one piece of the puzzle. By fostering collaboration among various stakeholders, including nonprofits, community leaders, credit bureaus, and other financial institutions, consumers can gain a comprehensive understanding of the different components of the financial system. This knowledge will empower them to make informed decisions and navigate the complexities of the financial landscape more effectively.
McClary: Beyond providing products and solutions, such as payment plans or loan modifications, financial education and credit counseling are paramount. Offering workshops on debt management or financial planning combined with one-on-one counseling sessions can help consumers gain the financial knowledge needed but also apply it to their current situation.
People are eager to improve their situation, sometimes they just need a push in the right direction.
Read more: https://www.digitaljournal.com/business/qa-how-does-financial-trauma-and-stress-impact-consumers-overall-financial-health/article#ixzz8HXN5DPf4
October 26, 2023
Ant operates Alipay, the world's largest digital payments platform, which boasts hundreds of millions of monthly users in China and beyond - Copyright AFP Greg Baker
While the topic of financial trauma has garnered more attention recently, it is still not a widely discussed issue. Empowering consumers to move beyond their financial trauma and become financially independent arguably has a huge benefit to the overarching economy.
To understand how the stress related to financial trauma impacts consumers overall financial wellbeing, Digital Journal spoke with Rod Griffin, senior director of consumer education and advocacy for Experian and Bruce McClary, senior vice president of membership and communication for the National Foundation for Credit Counseling.
DJ: How does financial trauma and stress impact consumers’ overall financial health?
Rod Griffin: Financial trauma can have both short- and long-term effects on a consumer’s mindset and relationship with money. In the short term, these experiences could leave consumers feeling anxious or ashamed about their financial situation, leading to overspending, under saving, or overcompensating by not spending enough, simply to avoid further financial insecurity. These behaviors can compound over time and put consumers in more dire situations, such as increased debt, the inability to access housing or having insufficient retirement savings.
Bruce McClary: Sometimes financial trauma can lead to poor financial decision making that can have a lasting impact on your financial wellbeing. For example, if you’re anxious or worried about paying your bills, you may opt for the quick fix, taking on high-interest loans or credit card debt. This can lead to a cycle of increasing debt that is difficult to escape.
It can also create a sense of scarcity or insecurity. You’re constantly worried about not having enough and falling back into financial instability that you become too risk averse. You might miss out on investment opportunities or saving for retirement, impacting your long-term financial success.
DJ: Are there any misconceptions about financial trauma and stress?
Griffin: Perhaps the biggest misconception about financial trauma is that it only affects consumers who have made poor financial decisions, but the reality is, anyone can experience financial trauma and stress. It could be the result of sudden job loss, divorce, unexpected home repairs, historical inequalities and the list goes on. In fact, Experian recently deployed a survey 2,000 U.S. consumers and found 68% of U.S. adults feel they have suffered from, or are currently suffering from financial trauma. In addition, 65% of adults admit to experiencing negative thoughts, flashbacks and anxiety when dealing with financial issues.
The other misconception is that people can easily overcome financial trauma by budgeting, saving, and investing, but financial trauma can be overwhelming, especially if you don’t know where to start. It can feel like the whole world is caving in on you. However, there are steps people experiencing financial trauma can take to lead more financially empowered lives.
McClary: There’s a misconception that financial trauma only affects an individual’s relationship with money. But it can also negatively impact an individual’s mental and physical health, personal relationships and even productivity. Constantly worrying about your financial circumstances can weigh heavily and make it difficult to be present with friends and family.
For instance, if an individual argues with their spouse about money, it can have a lasting impact on their relationship. Let’s take it a step further. If their children constantly witness the financial and emotional stress, it can impact their relationship with money. They may grow up with a fear of never having enough. Financial trauma can create a vicious cycle that impacts future generations.
DJ: What advice would you give someone experiencing financial trauma?
Griffin: Talk about your financial stress. Normalize conversations about money. The Experian survey found that more than half of respondents stated their family rarely or never spoke about finances, and the lack of discussion left 42% feeling like they never learned about financial planning; a significant obstacle to overcome if you experience financial trauma.
We have to break the cycle. Explore opportunities for financial literacy with friends and family. The more we acknowledge our financial challenges and openly discuss them with our trusted inner circle, particularly our children, the better positioned they are to learn from our experiences, and more importantly, they’ll feel more comfortable accessing financial education and resources in the future. Talking about our financial challenges also allows us to recognize we’re not alone.
McClary: Seek counsel from trusted and qualified experts. Many people are embarrassed or ashamed about their financial situation, and it can prevent them from getting help. Sometimes people feel like they’re the only one struggling but know that’s not the case. Financial struggles are common and seeking help is not a sign of weakness but rather strength. It can set an individual on the path toward financial success.
Getting one-on-one counseling can help consumers understand their financial situation better. For example, the National Foundation for Credit Counseling (NFCC) connects consumers with certified financial counselors to help them address various pain points, including debt management, homeownership, student loans or small business cash flow issues. Identifying areas of improvement and developing a plan are critical to overcoming trauma.
Beyond counsel, experts can also provide emotional support and limit the feelings of isolation when people need it most.
What steps can banks and credit unions take to help consumers overcome financial stress?
Griffin: Find ways to connect consumers with financial education tools and resources. This can go a long way. In fact, 55% of survey respondents expressed that more financial education would help alleviate their financial stressors, yet 37% of U.S. adults were unaware of where to access trustworthy information about financial literacy.
People need access to tools and resources, as well as financial knowledge to navigate the mainstream financial system. That’s how they become more engaged and active participants, and ultimately more financially successful.
Banks and credit unions are also just one piece of the puzzle. By fostering collaboration among various stakeholders, including nonprofits, community leaders, credit bureaus, and other financial institutions, consumers can gain a comprehensive understanding of the different components of the financial system. This knowledge will empower them to make informed decisions and navigate the complexities of the financial landscape more effectively.
McClary: Beyond providing products and solutions, such as payment plans or loan modifications, financial education and credit counseling are paramount. Offering workshops on debt management or financial planning combined with one-on-one counseling sessions can help consumers gain the financial knowledge needed but also apply it to their current situation.
People are eager to improve their situation, sometimes they just need a push in the right direction.
Read more: https://www.digitaljournal.com/business/qa-how-does-financial-trauma-and-stress-impact-consumers-overall-financial-health/article#ixzz8HXN5DPf4
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