US Economic Weakness Is Being Exaggerated – For Now
Sentiment surveys have taken a dive, but the data on consumption and the labor market won’t catch up until much later this year.
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Photographer: Spencer Platt/Getty Images North AmericaThe US economy’s contraction last quarter was something of a head fake, driven by a surge in imports as businesses tried to front-run tariffs. Consumption, though, has remained steady, begging the question of how soon tariffs will percolate through the economy and deliver the kind of negative shock to the hard data that household and business confidence surveys predict lies ahead.
The answer hinges to a large degree on when businesses that say they’re downbeat on the future put their money where their mouth is and slash spending, which would mean significant job losses followed by declines in consumer spending. And while that scenario may eventually play out, it’s likely to come closer to the end of the year given the uncertainty of this moment and the dynamics of corporate decision-making.