Consumers are taking a more cautious approach to spending as the cumulative impact of inflation persists but the economy remains in robust shape, David Solomon, the CEO of Goldman Sachs told delegates at the NYU International Hospitality Industry Investment Conference in New York.
“I think over the last six months, and particularly in the past few months, we've seen and you could see it in the quarterly earnings from a variety of companies, shifts in consumer behaviour, that to me indicate that consumers are taking a little bit more cautious approach to how they're allocating their dollars,” Solomon said.
“I think the reason for it is very, very clear. We talk about inflation, we talk about inflation coming down, but inflation is cumulative. And so things that matter to the average American consumer are 20 to 25%, more expensive today than they were four years ago. And that's a cumulative impact. That I think is starting to have some impact on behaviour.”
However, Solomon was upbeat about the wider economy, saying that it remained in “very good shape,” highlighting two key reasons.
The first was the sustained level of government spending and the second was the benefits of the shift in computing from CPUs to GPUs.
“Those are big tailwinds big, big tailwinds for economic activity here and around the world,” Solomon said.
US still the centre of the world
Solomon was bullish on the future of the US economy.
"The US capital markets are the pre eminent capital markets in the world. The leading capital markets in the world and not by a little by a lot. And so that creates a significant amount of activity that operates here in the United States," Solomon said.
Around 55 per cent of Goldman Sachs's business is based in North America, 20-30 per cent is Europe, Middle East and Africa, and around 15 per cent is Asia.
Solomon said that the hospitality sector was a key part of the economy.
"The hospitality business is a huge part of the economy. It's hugely important for a whole variety of reasons. It's hugely important in New York and this city and others," he said.