Consumers & Cash: US Economy's Spending Shift

📆This Week’s Topic

This week, we are going to talk about consumers. Consumers have been driving the economy for a while. Every transaction fuels the economy in some way or another. Consumer spending has been through the roof in recent years to fuel the economy. Borrowing has been through the roof, as well as credit card delinquency. (late payments)

💳 Cause & Effect

The consumer spending helped prevent American economy not to go into a recession during the pandemic, which was thought to happen at some point. Although we have been lucky not to have a recession yet, It may be coming soon. Below is a chart of how consumers have fueled the US economy. But before that, I want to talk about spending. Spending is the oldest money habit and remains strong. Spending is what drives all economies. No economy can survive without the circulation of money. It is essential because circulation adds value to the economy. For example, if I bought an apple for $2 at a store and sold it for $3. I have added value to the economy. If spending is down, it makes it more difficult to have a thriving economy.

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📊 Statistics

President Trump has announced tariffs that have raised concerns about an economic downturn. This is because of the tariff rates and how historically they tend to crash the stock market because in 1930, tariffs were also put in place in a similar way. These tariffs caused the economy crashed. This is also because of the tariffs and government layoffs, people are spending less. Spending is the foundation of all economies so that is bad. If the spending is down there is less circulation in the economy and less value is added to the economy.

🔚 Outcome

Households are spending less because they are more conservative with their money. This is the last straw for the economy, and we actually might go into a recession soon. But, this concern for money makes sense when the president announced tariffs for over 30 countries, global markets dropped over 6%. See previous article. If this pattern continues we might face a recession.

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⛱ Consumer Effect

The consumers will eventually be affected by their spending as well. If the economy isn’t adding value, consumers’ investments won’t go up, or they could go down. Even with the rising rates of inflation, consumer spending has stayed strong. But now the spending is finally slowing down, and our economy could suffer because of this. Also, prices are going to be more competitive to get the consumer to buy, advertising is going to be more intense to try and win the customer over.

🏢Business Effect

As I mentioned in the last paragraph I mentioned how advertising and prices are going to get more intense as businesses need to manipulate customers to buy however they can. Although, the inflation will cancel out the lower price. Whether that is in the form of mass advertising, false discounts, or other ways to intrigue the customer enough to buy. This will be very important for businesses as that will increase the spending of consumers. Also, these businesses will try to make it as easy as possible to shop for you to buy.

⏳ Final Summary

In summary, consumer spending has decreased and is likely to decrease as we shift towards 2026. This could negatively affect businesses and consumers because circulation (spending) is the number one driver of every economy. If spending decreases, the economy suffers. Businesses are going to advertise more and the cost of getting a customer is going to increase. Businesses will lower prices slightly but inflation will cause inflation to go up.

🙏Thank You & Important Information

Anyway, thank you so much for reading this edition of Friday Finance. I am thankful for the amount of support I have received for this newsletter. I am looking forward to growing this newsletter as large as possible. I am urgently looking for writers for the newsletter, so if you are interested in volunteer work (that could become a job). Please fill out the form below. Have a great week and I will see you next week.

Jacob Gans

Friday Finance