TUCSON, ARIZ. — Consumers are in better shape financially than before the pandemic, even as inflation soars and geopolitical events cause market disruptions, Scott Colbert, executive vice president, chief economist and director of fixed income, The Commerce Trust Co., told attendees March 2 at the International Sweetener Colloquium.
Mr. Colbert said every American received $18,000 in federal stimulus money, a lot of which “is still with us.” That amount was based on government spending of $6 trillion divided by the US population, with the understanding that each individual didn’t actually receive that amount.
“The average consumer is in much better shape than you think,” Mr. Colbert said, noting such areas as increased savings, federal stimulus money, higher wages, increased home valuations and other factors.
“Consumers have never had more money to service their debt,” he added, with consumers having six times more assets than debt — the largest margin ever.
“There’s a lot of positive momentum in the economy,” such as low unemployment even as inflation rises, he said. Numerous positive economic factors will drive the Gross Domestic Product forward.
He expects unemployment to decline to historic lows in 2022 as millions of jobs are created for fewer workers, many of whom have not returned to the workforce for various reasons, including staying home to take care of children amid soaring childcare costs.
“It’s become a tough situation to bring people back to work,” he said.
Mr. Colbert expects the Federal Reserve to implement seven interest rate increases of 0.25 point each in 2022 as the “Fed gets tougher on inflation.”
He had a pessimistic near-term outlook for the stock market, but a more positive forecast for returns on bonds. But he noted that selloffs in the equity markets caused by major geopolitical events, such as Russia’s invasion of Ukraine, typically are short-lived. Stocks currently were down about 10%, and he doesn’t expect the market to drop more than 20% before turning higher, which as been the case in recent recessions.
While the Russia-Ukraine war will have a devastating impact on those two countries, Mr. Colbert expects the impact on the United States to be minimal, perhaps taking a half a per cent off the GDP. Meanwhile, buying power in Russia has dropped 50% due to the plunging value of the ruble, he said.