US economy bucks recession warnings on back of high-income spenders
There have been recession fears brewing for a while now, and recent surveys show consumer sentiment is down. Despite the economic warning signs, some recent data points that indicate economic growth, including the Atlanta Federal Reserve’s GDPNow model.
The GDPNow model estimates 3.9% growth in the third quarter as of Friday, an increase from 3.3% from earlier in the month. Releases from the United States Census Bureau of Economic Analysis and the National Association of Realtors show that decreases in third-quarter gross private domestic investment were “more than offset” by increases in real personal consumption expenditures and net exports during the same period.
The Commerce Department said on Friday that personal consumption expenditures rose 0.6% in August, or, when adjusted for inflation, 0.4%. Physical items in particular went up by 0.8%. In addition, new home sales surged by 20%, the Census Bureau said.
The Atlanta Fed noted that the GDPNow is not an official forecast of the Atlanta Fed — instead, it’s a running estimate of real growth in the GDP. But others have been optimistic about these indicators as well, including Tom Barkin, the president of the Federal Reserve Bank of Richmond.
High income consumers driving better indicators
Speaking on Friday at the Peterson Institute for International Economics, Barkin said recent data showed consumers resumed spending over the summer, especially those with higher incomes.
“The underlying dynamics for businesses remain healthy too,” Barkin said. “Of course that differs by sector, with data centers and power generation booming and residential and agriculture struggling. Second quarter earnings were strong, and stock prices keep climbing. Uncertainty seems to be coming down as the path for government becomes clearer.”
He pointed to the bank’s CFO Survey, which showed that financial decision-makers’ outlooks on the United States economy improved in 2025’s third quarter. Still, the survey showed people still have concerns over the effect tariffs will have on prices.
“Our recently released CFO Survey, which we run in collaboration with the Atlanta Fed and Duke University, found that business optimism has ticked back up near the levels they hit at the end of last year, the highest since 2021,” Barkin said. “All of that bodes well for the economy.”
Mark Zandi, chief economist at Moody’s Analytics, said Friday in an interview on CNBC that much of the spending being seen is from “well-to-do high-income high-net-worth households that are seeing their stock portfolios are up.”
“The economy’s very vulnerable if the stock market does turn south, for whatever reason,” Zandi told CNBC. “People start seeing red on their screens and not green on their screens and the savings rate goes up not down. In the current context of no job growth, that’s recession.”
Chris Zaccarelli, chief investment officer for Northlight Asset Management, said in a note that the economy has continued to “surprise to the upside.”
“Despite the negativity captured in surveys and expressed by commentators, actions speak louder than words and consumers continue to spend,” Zaccarelli said.
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Ella Rae Greene, Editor In Chief
