Economic outlook still spooky despite recent treats
Consumers finished the third quarter strong as the still solid labor market continues to support spending, especially on services. But households are cutting deeper into personal savings and adding to debt, not a sustainable path for spending to remain buoyant in coming quarters. Headwinds for near-term activity are building, including rising interest rates, the resumption of student loan payments, emergent geopolitical concerns, and the potential for a federal government shutdown. This should result in significantly slower economic growth over the fourth quarter, a likely forerunner to a mild recession in the first half of 2024. The strength of recent economic data may even increase the odds of a recession as it reinforces a higher-for-longer rate path from the Fed into the new year.