Five charts to start your day

Is it the end of cheap money?

Is this the end of cheap money? Perhaps! I thought this first chart was interesting. Apparently, interest rates charged on credit cards and personal loans have risen quite dramatically in the US.

Yet, the US economy remains resilient. It expanded at an annualised rate of 4.9% in the third quarter. And this has been largely influenced by a singular factor: consumer spending. In fact, it accounted for over 50% of this latest economic growth print.

In short, consumer spending appears to be defying gravity. Many economists speculate that this is due to the robust US labour market that has given US consumers a degree of confidence to spend. However, this momentum could fade as higher interest rates start to bite.

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1. It’s the end of cheap money in the US

Source: The US Federal Reserve

Let’s back this up with the next chart to fully tell this story by looking at the personal savings rate in the US.

In short, the personal savings rate in the US has plummeted and is now resting below pre-pandemic levels. Americans are effectively spending beyond their earnings by 1 percentage point this year.

Again, this is probably to do with the US having a robust labour market. However, if this job market falters, we might see a dip in consumer confidence and spending in the future.

It's also worth noting that while Americans are saving less, their real incomes also diminished over the summer. This could indicate a potential slowdown in spending in the near future.