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The U.S. consumer is ‘walking towards a cliff,’ strategist warns

'The U.S. consumer is walking towards a cliff': Longview Economics CEO

Trouble is brewing for the U.S. consumer, according to one strategist, and a substantial labor market downturn could kick-start a recession.

“I think the U.S. consumer is walking towards a cliff, basically,” Chris Watling, chief executive of financial advisory firm Longview Economics, told CNBC’s “Squawk Box Europe” on Wednesday.

He said that a slew of recent economic indicators had showed consumers are quickly running out of excess cash, while household savings are coming under pressure.

“Of course, retail sales have been quite strong for the last few months and everyone gets quite excited about that, but, actually, if you look at what’s going on, the household savings ratio has been run down, and, in fact, real income growth has been negative for three months,” Watling said.

“So, it’s not quite all good news. I mean, quite the reverse, I think there are some real challenges coming for the U.S. consumer.”

His comments come even as data suggests the U.S. economy may have turned in another stellar performance, heading into the final part of the year.

Gross domestic product posted a 4.9% annualized gain for the third quarter, according to a Commerce Department report Thursday.

Shoppers carry retail bags along the Magnificent Mile shopping district in Chicago, Illinois, on Tuesday, Aug. 15, 2023.

Kelter Davis | Bloomberg | Getty Images

If that forecast materializes, the print would reflect the strongest U.S. economic output since the final three months of 2021, when growth was just shy of 7%.

Many strategists, asset managers and CEOs remain concerned about the longer-term economic outlook and will continue to closely monitor forward-looking signals for clues on whether the U.S. can avoid a recession.

The U.S. economy and its pivotal consumer component have been written off many times before, but the Federal Reserve’s move to keep liquidity flowing in the sector has partly helped to keep growth afoot.

‘The U.S. is in for a tough time’

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