If we all kept spending would there still be a recession??

[Saynotopineappleonpizza2021]

People are tightening their belts because of an impending recession......is that not going to make sure one occurs? What would happen if everyone acted like it wasn't going to happen, would it still?

Yes I've googled it - it confused me a bit stoll

A lot of people are tightening their belts because the increasing coat of food and fuel doesn't leave enough for luxuries. Not because of an impending recession.

Many people have no slack in their budget, so it's inevitable that increasing costs will have an impact on spending even if people try not to change their behaviours unnecessarily.

People can’t spend what they don’t have.

Thank you - that makes total sense! I suppose we are doing that in our house without even thinking about it!

Feel free to ignore my silly question from this point on - i knew mumsnet would help

It would.

Consumer confidence is only one small part of an economic downturn. Rising prices, rising interest rates, declining profit margins…there are a ton of micro and macroeconomic factors at play.

I believe there is a certain element of this. People are worried and don't like uncertainty so even if the can afford things they might be more cautious. Lots of people are already reigning in spending on extras, things like eating out, cars, furniture, holidays, home improvements. This in itself can lead to a recession.

Consumer confidence is only one small part of an economic downturn. Rising prices, rising interest rates, declining profit margins…there are a ton of micro and macroeconomic factors at play

This is correct.

Consumer spending is only one element. Business spending and investment is another: this is massively impacted by rising interest rates, economic uncertainty and also by changes in consumer behaviour.

We are going into an interesting period in which interest rates have to rise, government debt limits mean government spending is constrained, businesses are restricting investment. AND to top it off we have global civil unrest. It's going to be a rough ride for a couple of years. Or more, if there's another thing to tip us over the edge (like you know, China flexing its war muscles or another pandemic, or labour uprisings).

Labour uprisings is my bet. Working people are pissed-off and easily mobilised into action through platforms like FB.

(Very basically) an economy is made up of supply and demand. Right now we primarily have/had a supply side issue ie. due to the COVID and the war productivity is less than it was. Reducing the supply of certain goods pushes the price up (inflation) when demand remains the same. At some point, price increases push some people out of the market because X is just too expensive - therefore demand starts to the reduce.

Increasing interest rates is one tool to reduce spending and therefore demand - encourages savings due to a better rate and the cost of borrowing is higher. Also people
who don’t have surplus cash can’t spend what they don’t have. Theoretically at some point supply/demand will reach a new equilibrium. not in 2023 it won’t though.

I think mumsnet is a prime example- if you look at the 'what have you stopped buying etc' type threads - there will be a fair number of people who in reality have no need to cut back at all based on the 'now' -- but in stressful and uncertain times it's easy to pick up on a 'we all need to cut back' vibe as a bit of self protection -

We're still spending the same just getting a lot less for our money