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Inflation: 'Americans are being more cautious,' says analyst

Anyway you look at it, recent economic data shows, “Americans are being more cautious," warns one strategist.

“When you keep hearing 'recession,' 'recession,' even if you have a job, you’re beginning to wonder by hearing this over and over again, when is it going to hit you,” LPL Financial Chief Equity Strategist Quincy Krosby told Yahoo Finance Live on Tuesday.

“Americans are being more careful and more judicious on how they spend,” she added.

Quincy points to consumers using their credit cards more frequently. Even splurging on vacations, such as Disney (DIS) theme parks — a point of strength last quarter — could mean families are clipping costs elsewhere.

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“That’s an expensive endeavor. Many Americans plan for that well, well in advance, so they’re going to cut elsewhere,” said Quincy.

On Tuesday, Home Depot (HD) posted quarterly results showing a softening of consumer spending on home improvement compared to the pandemic boom.

The home improvement company said it saw "demand soften across other parts of the business, including flooring, kitchen and bath," that could potentially reflect consumers moving from larger to smaller projects.

Fresh retail sales data released on Tuesday showed an increase of 0.4% in April from the prior month. The figures are not adjusted for inflation.

“If you adjust for inflation, you’re looking at a fairly soft picture when it comes to the US economy and the state of consumer spending,” Greg Daco, chief economist at EY-Parthenon told Yahoo Finance Live.

“They’re still spending more dollars because things cost more, but they’re buying fewer goods and services,” he added.

While these economic factors “points to a slowdown,” a resilient job market may be blurring the picture, said Quincy.

“When you have an unemployment rate of 3.4% , it’s hard to envision that a recession is right around the corner.”

Ines is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre

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