AVB’s financial partner shares its economic outlook in a fourth-quarter update
By Alan Wolf, YSN
In its latest quarterly update and economic forecast, Wells Fargo’s Managing Director and Senior Economist Tim Quinlan laid out the good, the bad and the possibly ugly for appliance and furniture dealers in the near future.
First the good: According to Quinlan, while recession appears unavoidable at this point, we’re likely in for a mild one when it officially takes hold next year. Moreover, despite the withering effect of high inflation on purchasing power, consumers have remained surprisingly resilient, with expenditures for durable goods like refrigerators and dining room sets still up 24 percent from February 2020 through August 2022.
Fueling that spend is a combination of consumer credit, a declining savings rate and a substantial household kitty that was amassed during COVID and should carry consumers through the third quarter of 2023.
Related: Consumers Still Shopping Despite Inflation
That said, prolonged inflation is beginning to shift those expenditures from discretionary purchases to household essentials, dampening core retail sales as consumer buying plans fall to historic lows. In addition, retailers are now competing more with services, which are regaining ground as demand for goods slows.
See also: Budget-Strained Shoppers are Weighing Their Choices
The good news there, however, is that slower growth can help unclog supply chains, Quinlan observed on his Oct. 18 webcast, while markdowns on excess inventory could help tamp down inflation more quickly.
On the downside, the housing market, a key driver of home-goods spending, will continue to slow next year as rising mortgage rates disincentivize potential buyers, Quinlan said, while an uncertain economy remains vulnerable to such potential macro shocks as a renewed outbreak of COVID or the Fed going “full Volker” and causing an even deeper recession.
