New JPMorgan report predicts consumer spending will rise

The JPMorgan Chase Tower. Image: Kent Wang/Flickr/CC BY-SA

JP Morgan Chase, one of the nation’s largest lending institutions, has issued a report that indicates the economic forecast in the U.S. may not be as dire as it seems. In spite of high unemployment, the housing crisis and inflation, JP Morgan says American businesses should prepare for and work at increasing consumer spending confidence.

Economic forecast not as dire as many say

JPMorgan Chase said in September that its equity and fixed income trading businesses would generate 30 percent less revenue in the third quarter than in the second. However, the same firm has recently released a new report, “Light At the End of The Tunnel: Getting Ready for the Return of the U.S. Consumer,” suggesting that the near future of the U.S. consumer may not be as dire as many have predicted.

The report says:

“U.S. consumer balance sheets have improved to levels we have not seen in many years, suggesting that the U.S. consumers’ health is not as bad as many assume. This trend could lay the foundation for a recovery in consumer sentiment.”

Jobs and savings up, debt down

The report cites a 23 percent increase in job openings during the month of September. That is the largest one-month increase since the Great Recession, according to the report. Also, consumer debt is down $800 billion from 2008, when it was at its highest level. Americans also have 23 percent more savings than they did in 2006, says the report.

Many firms prepare for the worst

In spite of this observed trend, the report says, many businesses are not investing in ways to capitalize on the coming recovery. Many, it says, have been spent the last three years focused on “fortifying balance sheets and preparing for worse macro trends.”

Should plan for spending increases

“Decision-makers should consider putting in place a  road map to quickly change direction if and when a change in consumer sentiment creates a surge in demand,” said the report.

The report encourages American firms to share their wealth in the form of incremental dividend payouts and higher stock values in order to increase consumer wealth and, subsequently, consumer spending.

Sources

Daily Finance  
JP Morgan Chase (http://webcache.googleusercontent.com/search?q=cache:icuB_s7uvPQJ:www.jpmorgan.com/cm/BlobServer/JPMorgan_CorporateFinanceAdvisory_ReturnOfTheUSConsumer.pdf%3Fblobcol%3Durldata%26blobtable%3DMungoBlobs%26blobkey%3Did%26blobwhere%3D1158660810656%26blobheader%3Dapplication/pdf+&cd=1&hl=en&ct=clnk&gl=us&client=firefox-a)
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