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While there’s been a recent string of disappointing macroeconomic data, in reality, these developments are signs of the U.S. economy’s strengths, not weaknesses. The economic pessimism of the last few years has often been rooted in a misreading of the U.S. consumer. Too often, they are cast as financially squeezed, burning through their pandemic-era savings, and reeling from the real income cut that inflation has inflicted on them. In this telling, demand is artificially high, and its collapse has been delayed, not averted. Consumption is also still distorted by post-pandemic gyrations, but aggregate consumption sits more than $1.5 trillion above 2019 levels in real terms. This strength, however, is not an unalloyed good for all firms — while high interest rates have been absorbed successfully in aggregate, they still create existential struggle for some firms and households. Executives need to resist the temptation to respond to every wrinkle in the volatile data and adjust their mental models to lead in an era of tightness.
Less than a year ago, many pessimists rejected the possibility of a soft landing for the U.S. economy. They argued that U.S. resilience was a confluence of lucky factors, such as pandemic-era savings that would eventually run out. As inflation moderated and growth remained remarkably strong, they grudgingly had to accept that the economy is far more resilient than they had thought.
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Copyright for syndicated content belongs to the linked Source : Harvard Business – https://hbr.org/2024/05/the-u-s-economys-soft-landing-is-still-on-track
