US: Consumer spending is plodding forward despite inflation – Wells Fargo


Despite the highest inflation in more than 30 years, consumer spending is plodding forward, says analysts at Wells Fargo. They point out that after adjusting for inflation, the 0.8% increase in personal spending was cut in half to a 0.4% real increase. They add third-quarter consumer spending is on track for only a scant gain.

Key Quotes: 

“After the second quarter, in which euphoric consumers flushed with cash fueled economic growth, the summer months saw spending stall. This was mostly due to the Delta variant and rising case counts, but also a confluence of other factors from domestic ones like wildfires in the west to flooding in the east, to global ones like the ugly wind down to the war in Afghanistan and multiple instances of migrant surges at the southern border.”

“The rise in prices obviously makes gains tougher for the inflation-adjusted consumer spending figures. Inflation cut the personal spending estimate in half with real personal spending up 0.4% in August. We look for third quarter PCE to come in at just 0.9% before picking up somewhat in the fourth quarter of the year.”

“Our expectation is that consumer spending will limp across the finish line at the end of this year, a view that is generally supported by our high frequency consumer dashboard. Still, there are some flickers of green in there too. If COVID cases keep falling and sentiment turns positive, there is scope for a more solid finish to this tumultuous year.”

“Real disposable personal income fell 0.3% in August, a sign that inflation is already eating into household purchasing power. One comfort is that households are still saving more. Personal savings remain well ahead of pre-pandemic norms, with the saving rate at 9.4%, a full two percentage points above the prior cycle average.”

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Feed news

Latest Forex News


Latest Forex News

Editors’ Picks

EUR/USD struggles to rebound, holds near 1.1150 after US data

EUR/USD trades around 1.1150 in the early American session on Friday as investors assess the latest inflation data from the US. According to the US Bureau of Economic Analysis, Core PCE Price Index rose to 4.9% on a yearly basis in December from 4.7% in November, surpassing the market expectation of 4.8%. 

EUR/USD News

GBP/USD clings to small gains above 1.3400 on mixed US data

GBP/USD posts modest daily gains slightly above 1.3400 on Friday as the dollar rally loses steam. The data from the US showed that the core PCE inflation edged higher to 4.9% in December. On a negative note, Personal Spending contracted by 0.6% on a monthly basis.

GBP/USD News

Gold recovers modestly after US data, stays below $1,800

Gold managed to stage a rebound from the multi-week low it set below $1,780 but continues to trade deep in the red near $1,790. The benchmark 10-year US Treasury bond yield is rising more than 1% on the day after US data, limiting XAU/USD's recovery.

Gold News

Bitcoin Weekly Forecast: Federal Reserve cannot tame BTC’s uptrend

Bitcoin has experienced some significant losses over the past few weeks, with a more dramatic drop occurring this week after the Fed's decision was announced. As losses have extended and BTC has entered into the $30,000 zone, concerns regarding Bitcoin being in a bear market have increased.

Read more

Apple share price set to rise after another record quarter

With the Nasdaq closing at its lowest level in seven months yesterday, the Apple share price has also found itself on the end of the recent weakness in tech shares, down over 12% from its record highs in early January.

Read more

Forex MAJORS

Cryptocurrencies

Signatures