American Consumers No Longer Support Growth

Recovery from Covid’s lockdowns had its greatest force among households. Home buying boomed, and homebuilding followed. Retail purchases soared in every major category. But that pictured has now changed. Rising interest rates have made home ownership too expensive for many. Inflation has cut deeply into the buying power of people’s incomes, and real spending has slowed accordingly. Now looking into 2023, prospects hardly point in the direction of growth and prosperity. Instead, they point to a developing recession, if the economy is not already in one.

Home buying and home building had led in the months following the worst of the pandemic lockdowns. During the second half of 2020 and in 2021, purchases of new homes leaped upward. By the end of 2021, buying was running some 25% above pre-pandemic levels. Construction tried to keep up with the buying. Starts of new housing units had risen by the end of 2021 some 24% above pre-Covid levels.