The U.S. National Weather Service (NWS) described the winter storm as "epic", low temperatures, winds and snow for several days from north to south of the United States, about two-thirds of the population of the United States were affected, New York, Washington, Pittsburgh and other places are the lowest temperatures in the history of the same period, the round of winter storms in the United States has caused at least dozens of people The winter storm has caused at least dozens of deaths across the United States.
At the same time, this "epic" winter storm also let the weak U.S. economy again by the impact, people have to cancel travel plans, this holiday season consumption clouds shrouded. After the brief impact of extreme weather, the future of the U.S. economy will face a greater test.
The researcher of Bank of China Research Institute, Lv Haomin, told the 21st Century Business Herald that in the future, under the background of high interest rates and high inflation, the financial situation of U.S. households may deteriorate, and real consumer spending, especially commodity spending, may slow down. 2022 total U.S. household debt increased by $351 billion in the second quarter, the highest growth rate since the second half of 2008, of which mortgage and credit card debt increased by 8.8% and 15%, respectively. mortgage and credit card debt increased by 8.8% and 15%, respectively. In addition, debt spending as a share of income also climbed rapidly, from a historic low of 8.4% in the first quarter of 2021 to 9.6% in the second quarter of 2022.
As the global economy enters an era of "high interest rates," the financial pressure on U.S. households may increase, prompting a slowdown in real spending power.
The "frozen" economy
Affected by the super winter storm, many places in the United States into the "freezing" state. Recently, the temperature in major cities in Texas has dropped below zero degrees Celsius. Due to the snowstorm and the plummeting temperatures, some of the local power generation facilities failed, leading to a rapid rise in electricity demand, and the U.S. Department of Energy declared a state of energy emergency in Texas.
As of the morning of the 25th EST, there are still more than 175,000 homes and businesses across the United States without power. In the northeastern U.S., which was relatively severely affected by the winter storm, about 78,000 homes in Maine were without power and about 41,000 homes in New York State were without power.
In addition to electricity, the U.S. natural gas supply is also stretched. Snowstorms have caused natural gas pipelines to freeze and forced the shutdown of natural gas wells in many locations, and the decline in U.S. natural gas production has now reached record levels. Meanwhile, U.S. domestic demand for natural gas is at its highest level in nearly four years.
Due to the freezing of wells in Texas, Oklahoma and other places, natural gas production fell by about 6.5 billion cubic feet per day from the 20th to the 23rd, to a nine-month low, while 1 billion cubic feet of natural gas is enough to supply the needs of about 5 million American households for one day.
Along with the "freezing" temperatures, the U.S. economy. During the busy Christmas holiday season, the raging winter storm has completely disrupted the daily lives and vacation plans of tens of millions of Americans.
The American Automobile Association originally estimated that between December 23 and January 2 next year, about 112.7 million Americans will be at least 50 miles (80 kilometers) or more away from home to travel. But today, winter storms are forcing many people to stay home.
A Chinese American told the 21st Century Business Herald that he was thinking of going out for Christmas holidays, but the weather is so bad that his travel plans have fizzled out, and many friends around him have canceled their travel plans, so everyone is spending less money, and this holiday season consumption will definitely be affected.
FlightAware data show that as of the afternoon of the 25th, U.S. airlines canceled more than 1,800 flights to and from the United States or within the United States, and the 24th airlines canceled nearly 3,500 flights. Since Dec. 21, airlines have canceled more than 14,000 flights.
Consumer weakness has emerged
Although the winter storm on the U.S. holiday season consumption impact is not small, but the impact is relatively short-lived, the bigger problem is the aggressive interest rate hikes under the wave of economic impact, so that the consumer outlook is in jeopardy.
In fact, the U.S. consumer data has been weak. U.S. Department of Commerce data show that personal spending adjusted for price changes has seen zero growth in November from a year earlier, the lowest level since July and below market expectations of a 0.1% increase. Among them, inflation-adjusted spending on goods fell 0.6%, the worst since February, while spending on services rose 0.3%.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said it is not surprising that consumers have become more cautious as the excess savings they saved during the epidemic have now been spent in half, while the highly strained labor market is showing signs of easing.
Ming Ming, chief economist at CITIC Securities, told reporters that current U.S. consumption has seen sluggish growth, both in goods and services consumption. While nominal retail sales in the U.S. are still growing, real retail sales have been weak since April 2021 when inflation began to soar, and credit card spending data also show weak momentum in repairing credit card spending for goods and services after the second half of 2021, with signs of a recent downturn in service consumption.
It is important to note that the original high-end spending, which was not affected too much by the stagflationary gloom, is now also starting to fall. Ryan Preclaw, head of research investment science at Barclays, pointed out that credit card data show that consumer spending by high-income shoppers in the U.S. is starting to weaken. year-over-year growth in high-end spending was 8% higher than low-end spending in the first quarter of 2022, and this relative strength narrowed over the summer and has recently been completely reversed, with year-over-year growth in high-end spending already 4% lower than low-end spending.
Behind this phenomenon, layoffs in technology, finance and other industries have had an impact on high-end spending. U.S. employment consulting firm Challenger, Gray & Christmas released data on Dec. 1 showing that U.S. companies announced 76,835 layoffs in November this year, an increase of 417 percent year-on-year. Among them, the technology industry announced 52,771 layoffs, the highest since the company began counting related data in 2000. In the first 11 months of this year, the total number of layoffs at U.S. technology companies reached 80,978, an increase of 535% year-on-year, with the scale of layoffs hitting a 20-year high.
2023 heavy "headwinds" blowing strong
In the face of high inflation, the Federal Reserve this year offered aggressive interest rate hikes not seen in decades, but the bigger impact may only be seen next year, the pillars of the U.S. economy consumption in jeopardy.
Lv Haomin said, at present, the U.S. residents' ability to consume decline, the actual willingness to consume, 2023 consumption of the U.S. economic growth support role will be further weakened.
From the viewpoint of income, due to the high level of inflation and relatively high price level in the U.S. in 2022, the monthly year-on-year growth rate of real personal disposable income of U.S. residents has gradually fallen since April 2021, and the corresponding growth rate of real consumer spending is also declining; from the viewpoint of savings, the savings rate of U.S. residents has fallen from a high of 33% before the epidemic to the current 2.4%, and the amount of savings of U.S. residents is rapidly contracting In terms of consumer confidence, the willingness of U.S. residents to spend is also relatively insufficient. As of December, the University of Michigan Consumer Confidence Index and the Expectation Index were 59.7% and 59.9% respectively, which are at historical lows, reflecting the poor actual consumption intentions of U.S. residents.
In Ming's view, the growth rate of U.S. consumption is closely related to the growth of the labor market, which is expected to become the biggest headwind for consumption next year as the U.S. labor market weakens in the context of the economic downturn. The impact of the Fed's aggressive interest rate hike on the economy will be further revealed next year, and the labor market may deteriorate in the first half of the year, and U.S. consumption may stall faster in this context.
In addition to reflecting the flow of income level, reflecting the stock of residents' savings level will also affect the residents' consumption to a greater extent, it is expected that this round of excess savings in the first quarter of next year or so depleted, the support for consumption will become weaker. 2020 after the impact of the epidemic, the U.S. use of large-scale fiscal stimulus to promote the rapid increase in the level of U.S. resident savings, this round of U.S. residents accumulated excess savings of more than 2 trillion U.S. dollars, but The excess savings kept being consumed in the second half of 2021, and the consumption rate gradually accelerated.
Ming also reminded that although inflationary pressure in the U.S. will continue to ease next year, inflation is still at a high level, housing rental pressure is still high, and the dampening effect of inflation on consumption is expected to continue. High inflation tends to significantly reduce the growth rate of consumption, such as during the stagflationary period of the last century, and the current round as well.
Looking ahead, Ming analyzed that income growth as well as savings levels are the core determinants of consumer spending, and the excess savings gained by U.S. residents after the epidemic shock may be depleted in the first quarter of next year, income growth has also declined rapidly, there is a risk of deterioration in the labor market, and inflation is still sticky, overlaid with a higher risk of decline in assets such as residents' equity and real estate in the future, thus it is expected that income, excess savings, and the asset side of residents' assets will have a significant impact on U.S. consumption next year. The support of income, excess savings, and residential assets for U.S. consumption will be more limited next year, and consumer resilience is difficult to sustain.