USD: More headwinds for the consumer

In terms of the path for consumer spending, we are a little nervous that pandemic-era accrued savings will provide less support this year as they are increasingly exhausted by households while consumer credit growth is slowing sharply as higher auto loan and credit card interest rates bite. This means the spending growth will have to be driven by incomes and if inflation is still running hot, spending power may not grow very much – note the cost of living adjustment for social security payments rose 3.2% in 2024 versus 8.7% in 2023 (impacting 71mn Americans) and minimum wage payments rise on average around 3% in 2024 in the 22 states that are increasing their minimum wage this year. Falling quit rates also imply slowing wage growth. We aren’t expecting a collapse, but a slowdown in spending growth looks likely.