Consumer Spending Has Turned Red Hot - Expect No Recession In The Immediate Future

Well, I was working on one nerdy long-term historical post this morning when I decided to check the weekly update on consumer spending from Redbook. And, as you’ll see below, that was the end of that! (I may yet follow up this afternoon. We’ll see.)

Last week, Redbook consumer spending was higher by 10.0% YoY! That’s the biggest YoY gain since the end of 2022:

You are simply NOT going to have a recession in the immediate future in the face of that kind of increase in consumer spending, especially when even the recent spike in CPI only brought it to a 4.2% YoY increase. I have seen commentary that the big pick-up in consumer spending is due to bigger tax refunds, which may be true given that the recent surge started right after April 15. If that’s the case, I would expect it to subside as the summer goes on.

This plays directly into the “quick and dirty” forecast method I highlighted yesterday: if stock prices are higher YoY (a proxy for the producer side), and jobless claims are not higher by over 10% YoY (a proxy for job security); and also if real retail sales (a proxy for the consumer side) are higher YoY - there has never been a recession, going all the way back to World War 2.