Cautious but steady consumers buoying hopes for US economy

Francisco Santana shops at the Walmart Supercenter on Thursday, Feb. 9, 2023, in North Bergen, N.J. The inflation surge led Santana, a New York City resident, to shift his grocery shopping from local chains to Walmart. (AP Photo/Eduardo Munoz Alvarez) Francisco Santana shops at the Walmart Supercenter on Thursday, Feb. 9, 2023, in North Bergen, N.J. The inflation surge led Santana, a New York City resident, to shift his grocery shopping from local chains to Walmart. (AP Photo/Eduardo Munoz Alvarez)

By CHRISTOPHER RUGABER and ANNE D'INNOCENZIO / AP Business Writers February 16, 2023 7 min read

WASHINGTON (AP) — Call it the Goldilocks consumer.

Defying high inflation and sharp interest rate hikes, Americans keep spending — a trend that, if sustained, could keep the economy humming just enough to help avoid a much-predicted recession.

At the same time, surveys show that consumers on average don’t expect today’s still-high inflation to last for very long. That confidence could lead them to moderate their spending habits and wage demands, which would help slow inflation over time.

If the combination lasts, it could make it easier for the Federal Reserve to tame inflation without derailing the economy. As inflation eased, the Fed would be able to curtail its rate hikes, making a recession less likely.

“The economy is in the middling phase,” said Neil Saunders, managing director of GlobalData Retail. “It’s not too hot but not too cold, especially for retail. Things are not in the boom phase, but neither have they collapsed.”