According to a recent analysis by Piper Sandler, the economic landscape in 2024 bears striking similarities to the recessions of 1970 and 2001, with some critical differences that could lead to a sharper slowdown.
Analysts draw parallels between the current environment and those of previous recessions, pointing to “the big shift in inflation, big tightening cycles, and bubbles” in technology and consumer goods.
However, they highlight that consumers are now much weaker than in previous periods, with the consumer bubble “much bigger” than before.
This has led Piper Sandler to predict a GDP contraction of about 1%.
One of the biggest differences this time around is the state of consumer spending, the investment firm says.
They point out that consumer spending held up well in both 1970 and 2001, preventing a sharp decline in GDP. But Piper Sandler points out that the headwinds consumers face today are more severe, marked by “slowing real incomes, declining savings rates, and rising unemployment.”
The company added that the bursting of the consumer goods bubble associated with staying at home is also a major concern.
Piper Sandler describes this phenomenon as “four times bigger than the tech bubble of 2000,” posing a major threat to both unit sales and prices as it unravels.
Overall, Piper Sandler warns that the combination of a weak consumer base and the collapse of the stay-at-home bubble could lead to a sharper economic slowdown than we’ve seen in previous recessions.