Fitch: More aggressive policy to impact consumer spending in 2023

Fitch says it expects a very strong consumer balance sheet, the strongest labour market in decades to cushion the impact of likely recession starting in the second quarter, of 2023.

It is worth noting that the 2-year yield is under pressure which has left the US dollar hanging out to dry below last week’s low. However, should both of their trendline supports hold up, we could see some upward pressure in both assets.

Key Quotes

Fitch, on the US says the Fed’s aggressive tightening cycle will increasingly weigh on job growth and consumer demand in 2023.

A drag on real wages from high inflation will prove to be too much of a drain on aggregate household income and consumer spending.

Further aggressive interest rate policy and higher inflation pose risks to consumer spending in 2023.

A slowdown in job growth and rising unemployment in 2023 will take a wider toll on consumer spending.