The Real Economy

The Real Economy: May 2023

The chance of a recession is now 75% within 12 months, RSM forecasts.

Consumer spending, bolstered by trillions in excess savings built up during the pandemic, has been a pillar of the American economy as it has recovered in recent years. But there are signs that this resilience is fading.

This month’s Real Economy looks at the economic headwinds that are gaining strength in the middle market and at the changing economic landscape. RSM Chief Economist Joseph Brusuelas starts off with a look at the U.S. dollar and, despite recent talk of its decline as the world’s reserve currency, makes the case that it will remain that way for the foreseeable future.

The global financial system rests upon the stability of the dollar and the large trade deficit of the United States. In essence, the United States exports dollar stability to obtain goods and services at a cheaper price, and in doing so enhances the welfare of its citizens.
Joe Brusuelas, Chief Economist

This is all coming as the prospect of a recession is rising. As consumers at the lower end of the income spectrum are pinched by elevated inflation, they are spending down their savings, which could weaken the economy just as the Federal Reserve’s rate increases restrict lending. As a result, RSM now puts the chance of a recession at 75% over the next 12 months, up from our previous estimate of 65%.

We look at these issues and more in the May issue of The Real Economy.

Inside the May issue


How long will consumers continue to spend?

Are the good times in consumer spending coming to an end?
Overall spending has remained robust, despite elevated inflation and rising interest rates. But that could be changing.

American consumers have shown remarkable resilience as the economy has rebounded from the depths of the pandemic. Overall spending has remained robust, despite elevated inflation and rising interest rates.

But that could be changing. Lower-income consumers have started to show cracks in demand, and that could spread as the Federal Reserve’s rate hikes and recent banking instability take their toll.

The following analysis looks at where consumer spending has been concentrated over the last three years, the difference in buying power across income quartiles and other macroeconomic factors that will affect spending moving forward.

RSM contributors

Discussing the economic challenges ahead

Join our Chief Economist Joe Brusuelas and U.S. Chamber of Commerce Executive Vice President Neil Bradley for their discussion on matters affecting middle market businesses.

From workforce and supply chain challenges to addressing consumer behaviors and profitability, they’ll examine the economic headwinds facing companies and how businesses can address ongoing risks and challenges. 

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The Real Economy Blog was developed to provide timely economic insights about the middle market economy. It is offered as a complement to RSM’s macroeconomic thought leadership, including The Real Economy monthly publication and the proprietary RSM US Middle Market Business Index (MMBI).

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Middle market organizations, which make up the “real economy,” are too big to be small and too small to be big. They have distinct challenges and opportunities around resources, labor, technology, innovation, regulation and more.