Consumer Spending Numbers Don't Look So Rosy After Adjusting For Inflation

Friday, September 28, 2012 08:07
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Consumer Spending Numbers Don't Look So Rosy After Adjusting For Inflation

Tags: economic indicators | U.S. economy | US investing

US consumer spending rose in August but only at a level .1% better than the increase in prices. Prices rose at .4%; consumer spending increased .5%.
 
The drag in job creation and the increases in energy and food prices put a damper on the prime ingredient for growth in US gross domestic product (GDP).

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That means this is not likely to be a consumer-led economic recovery. And even though gas prices appear to have peaked, the effect of higher prices will filter into the next couple of months for consumers.
 
That gets into the holiday season, the prime time for retailers and heightened spending.
 
The higher energy prices did translate into retail sales, which increased .9% in August and were driven by car and gasoline sales.
 
Stagnant income levels mean there is little left to spend on other items. Disposable income fell .3% after adjusting for inflation.
 
GDP is calculated based on the inflation-adjusted consumer spending numbers. An inflation index tied to spending patterns increased 1.5% from August 2011.
 
Core inflation—minus food and energy costs—only increased .1% in August from July.
 
This means that inflation is not yet a huge worry, but sustained increases in food and energy costs could eventually cause inflation to spill over into other areas.  

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