In the past week, a combination of second quarter earnings and newly released economic data have depicted a resilient American consumer, propelling stocks higher despite ongoing fears of a looming recession.
The incoming data might even be bullish enough to assume a recession isn't imminent at all.
"Consumption is 70% of the economy," Goldman Sachs chief economist Jan Hatzius said during a media roundtable on Wednesday. "So, you would generally expect these things to be fairly closely related, GDP growth versus consumer spending growth."
Hatzius sees gross domestic product (GDP), the measurement used to indicate economic expansion or contraction, remaining positive. He predicts the growth will be "unspectacular," but it's growth nonetheless.
Recent reports in retail sales and job additions back that opinion. In June, retail sales increased 0.2% from the month prior while the US economy added 209,000 jobs. Both metrics grew less than economists had projected. But when the discussion is centered around economic expansion versus contraction, growth matters.
Earlier this week, Goldman Sachs pushed back its estimates for a recession. After seeing a 35% chance back in March, the firm now sees a 20% chance of a recession in the next 12 months. That's largely been driven by data that's come in better than many economists feared and the power of the consumer to spend.
While discourse continues about what dwindling excess savings will mean in terms of a consumer slowdown, Hatzius highlighted real personal disposable income growth, a metric tracked by the Bureau of Economic Analysis.
In May, real disposable income increased by nearly 4% compared to the same month in 2022.
"The consumer was effectively kept afloat by the availability of excess savings that were used to effectively prop up consumption for a temporary period," Hatzius said. "Now, there's less excess savings. It's probably no longer as important a factor, but we're now seeing income growth and that is supporting consumption."
Goldman Sachs isn't the only one on Wall Street seeing growth on the horizon either. On Thursday, Morgan Stanley boosted its fourth quarter GDP projection to 1.3% growth from 0.6%.
"Incoming data now point to a more comfortable soft landing than we had anticipated, led by public investment in infrastructure and nonresidential structures investment," Morgan Stanley chief US economist Ellen Zentner wrote on Thursday.
In his weekly economic report titled "Sideways except for the consumer," Bank of America's US economist Michael Gapen noted that the June retail sales "control group" surprised to the upside. Importantly, the control group is what's tracked by the Bureau of Economic Analysis and contributes to GDP readings.
"Strong labor markets; sizable, albeit depleting, excess saving, and positive wealth effects have kept the main engine of the economy on track," Gapen wrote.
In June, the sales for the control group increased by 0.6%. Not a sign of spectacular growth. But as Gapen says, it's a sign that the consumer, and therefore the economy, "keeps on chuggin'."
Josh Schafer is a reporter for Yahoo Finance.