US: Consumers are increasing their spending even after adjusting for inflation - Wells Fargo
01.12.2022, 16:06

US: Consumers are increasing their spending even after adjusting for inflation - Wells Fargo

Data released on Thursday, showed Persona Spending rose by 0.8% in October while Personal Income increased by 0.7%. Analysts at Wells Fargo, point out that the rising cost of goods and services means that nominal spending would increase even if the volume of goods and services consumed were flat. In other words, consumers are increasing their spending even after adjusting for inflation.

Key Quotes: 

“Yet even as prices grow faster than paychecks, consumers are still buying more even in volume terms. This is a real pickle for inflation fighters at the Federal Reserve because firms who find that they can pass along price increases without a concomitant decline in demand have no financial incentive to lower prices.”

“The monthly change in the PCE deflator was unchanged at 0.3%, but due to base effects, the year-over-year rate did cool to 6.0% in October from an upwardly revised 6.3% in the prior month. The year-over-year rate of core inflation also came down slightly to 5.0% in October.”

“Monetary policy acts with a lag, and while it still may be early days, consumers' relentless spending suggests they remain unfazed by high inflation and the rate hikes intended to get prices under control.”

“The staying power of the consumer has been uncanny thus far, but consumers are no exception to the same macro headwinds that have plagued the rest of the economy.”

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