The Biden White House likes to promote good news, even if it has to make up cheery headlines out of thin air. Good news means that the administration’s devil-may-care spending practices and illogical economic policies are working.

Stock markets appear strong, and the job market looks tight. But if you really want to know the direction of the economy, you need to pay attention to consumer behavior. Consumer spending makes up almost three-fourths of the economy, and American consumers aren’t feeling all that confident right now. In fact, according to a recent Wall Street Journal analysis on consumer spending trends, Americans are starting to tighten their belts.

The signs are evident. Even in the face of cooling inflation, retail purchases have fallen three of the last four months. Spending on services in December was the worst in nearly a year. Existing home sales in 2022 were at their lowest level since 2014. New automobile sales were the worst they’ve been in a decade.

What happened?

At one point, the economic picture was actually starting to look good. With trillions of dollars of pandemic-inspired government stimulus, strong savings accounts, and cheap credit, consumers practically spent their way out of the economic doldrums that washed over us in 2020. But that spending spree couldn’t last forever. Consumers bought all the big-ticket household items they needed, and their savings accounts have been depleted. Savings as a share of income was 3.4% in December, down from 7.5% the same time a year ago. Credit card interest rates are up. And the Fed’s interest rate hikes, which were designed to bring inflation under control, are having their predicted side effect: reduced spending at home.

Although the economy grew at a 2.9% annualized rate in the fourth quarter of last year, reduced holiday spending led to a slower start for 2023. Banks are preparing for a rise in loan delinquencies, as higher-than-the-minimum credit card payments slide and borrowers are beginning to fall behind on mortgage payments.

The labor market looks good on paper, with unemployment at 3.5%. But that doesn’t account for the recent spate of layoff announcements in the tech sector, which will take weeks to appear on the job boards. Let’s not forget the chronically low labor participation rate that represents what now amounts to a permanent class of unemployed and underemployed Americans.

Recession fears among consumers and economists are high, but the worst could be avoided if consumer spending stabilizes. That may be what’s happening right now, as consumers recognize the limits of what’s possible and hunker down for the coming economic storm. Their actions may not necessarily spell doom on the horizon, but their mood is definitely less optimistic than what the Biden White House would have us believe.