Economist Gary Shilling warns consumer data points to recession risk within a year

Gary Shilling, known for earlier recession forecasts, warned that a combination of falling retail sales, lower consumer confidence and mounting credit liabilities signals a strong recession probability within a year. He pointed to a 0.6% drop in July retail sales, the first decline in consumer sentiment in three months, and a record $5.1 trillion in consumer credit at the end of Q1. Savings rates have slipped to about 3% of disposable income, while bankruptcy filings rose 12% over the past year.

Shilling also cited weaker performance at major retailers like Walmart and stronger growth at discount chains such as Dollar Tree and Five Below, indicating shifting spending patterns. He cautioned that if inflation stays high, policymakers could face stagflation, limiting the Federal Reserve’s ability to cut rates.