Is US headed for recession? Here’s what Moody’s chief economist Mark Zandi says
Moody’s economist Mark Zandi stated that the US economy can avoid recession if the wealthy continue spending. Recent data shows that the top 10 per cent of earners accounted for 49.2 per cent of expenditures, the highest since 1989.
Moody’s Analytics chief economist Mark Zandi said on Tuesday that the US economy can most likely avoid a recession if the wealthiest individuals maintain their current level of spending.
In a post on the social platform X, Zandi showed recent data on spending levels for various income groups and wrote, “The US economy is being largely powered by the well-to-do.”
“As long as they keep spending, the economy should avoid recession…but if they turn more cautious, for whatever reason, the economy has a big problem,” he added.
The top 10 per cent consumers of the income distribution spent 49.2 per cent of total expenditure in the second quarter, up from 48.5 per cent in the first quarter, reaching the highest level since data was recorded in 1989, according to a report by Bloomberg citing an analysis by Zandi.
These figures come at a time when the US Federal Reserve flagged ‘employment risks’ and ‘somewhat elevated inflation’ in the US economy while cutting the benchmark interest rate by 25 bps to 4 per cent-4.25 per cent.
Chances of a recession
The chief economist had previously cautioned about the possibility of a recession in the United States.
“There is an uncomfortably high 48 per cent probability that the US economy will suffer a recession in the next 12 months,” according to Zandi's post X, where he mentioned Moody’s latest leading economic indicator.
“It’s less than 50 per cent but historically, the probability has never gotten this high, and a recession has not ensued,” he added.
Meanwhile, in the X post on Tuesday, Zandi said the new spending data shows why Americans are dissatisfied with the state of the economy.
“Looking at the data, it’s not a mystery why most Americans feel like the economy isn’t working for them,” Zandi noted.
“For those in the bottom 80 per cent of the income distribution, those making less than approximately $175,000 a year – their spending has simply kept pace with inflation since the pandemic,” he said.
“The 20 per cent of households that make more have done much better, and those in the top 3.3 per cent of the distribution have done much, much, much better,” he added.