We are seeing lower recession challenges and the U.S. consumer very resilient, and that’s bringing resiliency in our core products for food demand.

– Archer Daniels Midland Company, Second-Quarter Earnings Call

I’ll let you know we’re really staring down at consumer spending and it’s been flat last few months, maybe several months, but it’s differentiated as you look at goods versus services. We’re clearly seeing, and I talked about it in my opening remarks, less on the goods and more on the services.

– Union Pacific, Second-Quarter Earnings Call

The resiliency of the U.S. consumer over the last year in the face of sharp increases in interest rates has been a surprise to most. Not only has the unemployment rate remained exceptionally low, but consumer confidence has recently been rising again. However, spending is already starting to moderate and in the coming quarters we anticipate this activity to slow further to the point where a mild recession is more likely than not—i.e., we may not be in for as clean an escape, or an “immaculate disinflation” back to 2% inflation and no recession, as the market currently anticipates.

Given that the behavior of the consumer is key to this narrative, in this Economics Weekly, we reexamine what have been the main drivers of consumer spending over the last few years, and what those drivers might look like in the quarters ahead.

For a copy of this report or to subscribe to the Economics Weekly or Economic Indicators reports, please contact your William Blair representative.

Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.