Wall Street says a recession is coming, consumers say it's already here

More than one-third of Americans believe the economy is now in a recession. PHOTO: AFP

ATLANTA (BLOOMBERG) - The recession calls are getting louder on Wall Street, but for many of the households and businesses who make up the world economy the downturn is already here.

Take Ms Gina Palmer, who runs She Salon on Atlanta's busy Northside Drive west of downtown. She'd ordinarily expect her business to be alive with the din of customers on a Friday morning.

But on that day late last month, it was largely empty and quiet, save for a few employees. With summer break moving into full swing, her clientele is preoccupied with affording summer camps for their kids amid soaring food and gasoline costs.

"When people look at their budgets, the first thing they cut is self care," Ms Palmer said. "I've seen my clients go from having weekly appointments to bi-weekly, and my bi-weekly clients are now coming in every six weeks."

Some 6,400km away, Ms Abbie Marshall, the landlady of The Buck Inn in the countryside of northern England, is also trying to cope with surging costs. When she took over the pub last year, she ran the numbers on a 4 per cent inflation rate - an assumption that would normally be seen as conservative given it's twice the Bank of England target. But now it's above 9 per cent and rapidly heading for double digits.

Ms Marshall has changed the costs on her menu four times and raised the price of a pint of beer on three occasions.

For Ms Palmer, Ms Marshall and many others, the technical definitions of a recession - traditionally two quarters of contraction - are irrelevant.

Goldman Sachs Group economists put the risk of such a slump in the US in the next year at 30 per cent.

A Bloomberg Economics model sees a 38 per cent chance in the same period, with the risks building beyond that time frame.

But for many it already feels like it's here.

More than one-third of Americans believe the economy is now in a recession, according to a poll last month by CivicScience.

The worries among small business owners, consumers and others are illustrated by so-called Misery Indexes, which blend unemployment and inflation rates.

The gauge for the US is already 12.2 per cent, similar to levels witnessed at the start of the pandemic and in the wake of the 2008 financial crisis, according to Bloomberg Economics.

Britain is similarly elevated, and other measures echo that grim view.

US consumer expectations as measured by the Conference Board have dropped to the lowest in almost a decade.

Sentiment across OECD member countries has fallen for 11 straight months and hasn't been this low since 2009.

"People are getting poorer," said Mr Ludovic Subran, chief economist at Allianz SE. "So this is not a recession, but it really feels and tastes like a recession."

The reason? Prices are soaring worldwide, particularly for essential foods and fuels, eroding the spending power of families. Central banks are responding to the inflation surge, but as they push up interest rates that turns the screw on those with debts.

Workers are complaining their wages aren't keeping up with the cost of living, a frustration that's already led to strikes in some countries.

Quite simply, people's money is disappearing fast, and they're worried it could get a lot worse.

Inflation was already heading higher coming into 2022 amid a post-Covid demand bump.

Then Russia invaded Ukraine, energy and food costs jumped, and the world found itself dealing with soaring prices, a very unfamiliar situation after years of low inflation..

Given the impact on basics, from filling the gas tank to the supermarket run, few have escaped the squeeze.

In New Mexico's capital city, the cowboys at the annual Rodeo de Santa Fe last month were sweating the price of fuel more than mounting a 2,000-pound bull.

The number of entrants in the contest fell by a third, which President Jim Butler blames on the price of gasoline. While farmers and truckers can pass along their fuel costs, "the cowboys don't have it," he said.

The tough times stretch to Asia too.

In Beijing, 31-year-old Tian Lijun began the year shutting the two florist shops she ran. After finding work as a sales representative for a high-end medical clinic, she lost that job in May.

To make ends meet, she's taken to selling flowers at stalls in community compounds and stopped shopping for anything beyond necessities.

"There's no way to make money nowadays. I can only manage to repay my loans, pay the rent and feed myself," Ms Tian said. "Forget about entertainment or any other spending."

Many have to make even tougher decisions on simple day-to-day spending, sometimes forced to choose between the electricity bill or food.

British grocery chain Tesco says shoppers are buying fewer items and trading down to cheaper own-brand versions of staples.

Just as the pandemic and its recovery proved to be k-shaped, so the next deterioration may prove similarly unequal. In Britain, a report by the Resolution Foundation think tank said that years of income stagnation have left the poorest families "brutally exposed" to the cost-of-living crunch.

Mr Phil Storey's recent experience as chief executive at Hammersmith & Fulham Foodbank in London is more evidence of that.

With food prices up almost 9 per cent, he's seen an increase in demand.

"We're seeing people who were on benefits but stable financially, people who really know how to budget, now coming to us,"

Mr Storey said. "We're even seeing working people, those on zero-hour contracts, needing help to tide them over."

At The Buck Inn, Ms Marshall raises a similar concern as she tries to balance protecting her income with not driving away customers.

"The cost of goods is moving so quickly, I have to pass that on," she said. "But at what point does my pricing become prohibitive? Does going out become so expensive that it is only for the better off?"

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