Robust Clothing Imports, Consumer Spending Betray Economic Doomsayers

Some commonsense and calm may need to rule at this stage

Unless the US economy goes into a ditch pretty soon, expect to see many red faces in the mob of experts who, for about 18 months, have been warning of an imminent recession (defined as two consecutive fiscal quarters of declining Gross Domestic Product).

Personal consumption contributes about two-thirds of the total US GDP. As goes the consumer, presumably, so goes the economy.

Evidence cited by economists to bolster the case for a downturn lately has focused on the personal savings rate. How much spare cash people have affects spending habits.

According to the Federal Reserve, the personal savings rate currently hovers around the lowest point ever recorded since the middle of the last century, when that statistic was first introduced. The last time the rate bottomed out was in 2005, just before the so-called mortgage meltdown and the epic Great Recession of 2007-2009. Will history repeat?

That low rate might be a harbinger of a slowdown in consumer spending. But it follows a historical spike in 2020 when federal stimulus payments meant to offset the Covid shutdown 2020 sent monthly savings rates as high as 33%.

Does a slowdown in the rate signal a recession, or did consumers sock away so much that they don’t need to save as much now?

After three years of economic disruption, is it possible that a downturn is not the start of a recession but simply trending toward a new or long-term normal?

Another statistic being cited recently is import cargo volumes. According to a National Retail Federation report, volume at the nation’s major container ports is expected to remain “well below” last year’s levels heading into this fall.

“Consumers are still spending, and retail sales are expected to increase this year, but we’re not seeing the explosive demand we saw the past two years,” according to NRF official Jonathan Gold.

Not a big surprise when you consider that apparel and footwear imports into the United States rose four out of the last five years — up in 2022 by 11.3% on top of an 18.5% year-over-year increase in 2021, according to a Journal of Commerce report.

Is the only alternative to explosive demand a recession? Or is it possible that — after the wild swings in supply and demand of the past couple of years — inventories have been thinned and are trending toward balance?

Finally, what do we see when we look at the big picture? The latest Commerce Department report shows a healthy bounce in retail and food services sales. The Bureau of Labor Statistics reported that the April unemployment rate (3.4 percent) was about where it was a year earlier; average hourly earnings have increased by 4.4 percent over the past 12 months; and inflation has been steadily falling for more than a year.

It’s worth remembering that, in the grand scheme of things, so-called black swans events like pandemics and wars are exceptions to long-term trends; that a single metric can’t tell the whole story; and that any one company in the retail industry does not live or die by the ebb and flow of global events.