Leading economist warns Americans to ‘hunker down’ and ‘save your pennies’ before a possible recession – after it emerged households are spending $709 more per month than two years ago
- Economist Nancy Lazar has warned Americans to prepare for a looming recession
- “Save your pennies because unfortunately the economic outlook will get worse before it gets better,” she said.
- It comes as US credit card debt broke the $1 trillion barrier for the first time in history
Now is the time for Americans to “hunker down” and “be careful” about their spending, a leading economist has warned.
Nancy Lazar, chief global economist at investment firm Piper Sandler, has issued a stern warning to Americans to regulate their spending after it emerged that households were spending $709 more per month than there were. two years old.
“Save your pennies because unfortunately the economic outlook is going to get worse before it gets better,” Lazar said. Fox News Digital.
“Be conservative, watch your credit cards. Now is the time to pull back and try to hold on to your savings rather than take on more debt.
It comes as US credit card debt broke the $1 trillion barrier for the first time in history, according to Federal Reserve data.
U.S. credit card debt broke $1 trillion barrier for first time in history, Fed data shows
Credit card balances rose by $45 billion in the second quarter of the year as interest rates – which recently hit their highest level since 2001 – and runaway inflation continue to weigh on households.
Lazar called the economy “overheated” and said price levels remained “extremely high”.
The annual rate of inflation rose slightly last month to 3.2%, up slightly in July from the annual increase of 3% in June.
“It’s not just restaurants that have dramatically increased prices – it’s also in groceries, which is now creating a cost of living crisis for many people in the country,” she said. declared.
Analysis by Moody’s Analytics found that inflation is forcing Americans to spend $709 more per month on everyday goods and services than two years ago.
In order to drive down price levels, she added, “unfortunately, it typically requires an outright decline in economic activity or a recession.”
“Consumers have every right to protest against these higher prices. you see more and more consumers cutting back and buying less at grocery stores as a result of this.
According to Lazar, an impending recession will put pressure on all wealth groups across the United States.
“It won’t just be low-income workers who will be made redundant. It will be in all areas,” she said. “But we better take this short-term hit to get those price levels back to normal.”
Along with inflationary pressures, Lazar said economic recovery would depend on managing the budget deficit.
“We need to cut public spending and we need to reform entitlements, including social security reform,” she added.
US debt has topped $31 trillion – with the House of Representatives and Senate passing legislation in June to avert a catastrophic government default with days to spare.
US inflation hit an annual rate of 3.2% – up slightly in July from the 3% annual increase in June
The added pressure on household budgets has increasingly forced Americans to resort to extreme measures to cover their expenses.
A Bank of America report earlier this month found the number of workers taking “hardship withdrawals” from their 401(K)s soared 36%.
And according to the latest Fed data, there are 578.35 million credit card accounts in the United States. It marked an increase of 5.48 million from the end of last year.
The average interest rate on credit card balances is also close to a record high of 20.53%, according to The bank rate.