Last week’s economic discussions centered around the resilience of the U.S. economy, which displayed a robust growth trajectory through the third quarter of 2023. The annualized GDP growth rate of 4.9% for the quarter marked the highest since 2021, significantly outpacing the typical trend growth.

This expansion was largely fueled by personal consumption, a critical driver of the U.S. economy, accounting for about 70% of the GDP.

Despite this, concerns were raised about the sustainability of such consumer spending levels, especially as we approach the critical holiday shopping season. Analysts are pondering whether the American consumer can maintain this momentum given certain emerging constraints.

Several indicators suggest potential headwinds for continued consumption at current rates. Notably, household savings rates have dwindled to post-pandemic lows, with the stimulus-induced financial cushion seemingly depleted. Concurrently, credit card debt in the U.S. has surged to over $1 trillion, with delinquencies on the rise—a trend that could necessitate a pullback in consumer spending.

Additionally, the Federal Reserve’s Senior Loan Officer’s Survey indicated that banks are maintaining stringent lending standards, which could further suppress consumption by limiting access to credit for consumers and businesses alike.

These factors, combined with geopolitical uncertainties and the looming threat of a U.S. government shutdown, could dampen consumer sentiment and spending. However, a silver lining exists: a potential slowdown in consumption might ease inflationary pressures and forestall further Federal Reserve rate hikes, ultimately benefiting the financial markets and investors.

Investors will have their hands full in the coming week with a suite of critical financial disclosures. Retail giants Walmart, Target, Home Depot, and Macy’s are all queued up to report earnings, which will offer a peek into consumer spending habits as the Census Bureau also releases October’s national retail sales data.

These reports could be pivotal in shaping market sentiment, especially as the holiday shopping season looms on the horizon, a period crucial for retail profitability.

In addition to the retail sector’s performance, the week will also cast light on broader economic indicators.

The October Consumer Price Index (CPI) will provide fresh insights into inflation trends, while housing market health checks will come from reports on last month’s housing starts and the National Association of Home Builders’ Housing Market Index for November.

Meanwhile, a significant macroeconomic risk hangs over the market as the deadline for the national budget decision approaches on Nov. 17. Without Congressional action to pass spending bills or another stopgap measure by Friday, the government could face a shutdown, with potentially wide-reaching consequences for the economy and markets.

This week, attention will be drawn towards a slew of earnings reports and central bank meetings, offering insights into both corporate performance and monetary policy directions. Companies like Apple, McDonald’s, Pfizer, AMD, Caterpillar, Stellantis, Qualcomm, PayPal, Airbnb, and Starbucks are all set to release their earnings, providing a comprehensive look at various sectors of the economy.

Simultaneously, key central bank meetings, including the U.S. Federal Reserve, Bank of England, and Bank of Japan, will be closely watched for any changes or indications in interest rates, which could have significant implications on global financial markets.

On the economic data front, the U.S. is set to release its nonfarm payrolls report for October and updates on home prices and PMI survey readings, shedding light on the labor market and broader economic conditions.

In the eurozone, preliminary GDP and inflation readings for the third quarter will be available on Tuesday, offering a snapshot of the region’s economic health. These data points, combined with the earnings reports and central bank decisions, will provide investors and policymakers with crucial information, making it a critical week to stay informed and make strategic decisions.