The U.S. consumer plays an important role in the economy, accounting for almost two-thirds of U.S. Gross Domestic Product (GDP). The US economy is currently at a critical juncture as consumer spending returns to normal after the pandemic, an unprecedented period where the consumer accumulated approximately $2 trillion in savings and stimulus funds. As consumers have now spent these funds, we are closely watching data to see how this impacts the economy.
A datapoint we follow is the Johnson Redbook Index, which measures the percentage change in sales at stores that have been open for at least one year. This proxy for consumer spending is based on a sample of large U.S. retailers, including about 9,000 department, discount, and chain stores. This index experienced a sharp drop at the onset of the pandemic, followed by a 2021 spending spree fueled by stimulus checks, increased wages, and pent-up savings. However, consumer spending has steadily trended lower since July 2022, with the Johnson Redbook Index experiencing a relatively rare year-over-year decline in July 2023.
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