| Before Christmas, we received consumer spending data for November, showing spending rose 0.1%.
- Inflation was also 0.1% in November, so inflation-adjusted spending was flat.
Why it matters: That still counts as good news as analysts continue to wait for the bottom to drop out of spending because of inflation. It still hasn’t happened as consumers keep spending.
Be smart: They’re able to do so for three reasons:
1. Incomes are rising. Income rose 0.4% in November and salaries and wages 0.5%. Both are well above inflation.
2. Savings. Consumers still have a reservoir of savings to draw from. Excess savings during COVID were pushing $3 trillion. They’ve dwindled closer to $1 trillion now, but that is still a lot of available money consumers are using to keep spending.
3. Inflation is easing. Inflation fell sharply from October to November, which took pressure off consumers’ budgets. Importantly, core inflation, excluding food and energy, also fell.
Looking ahead: Holiday sales numbers will be another indicator of whether consumer strength remains. We will get that data soon. But there is little reason to think it won’t jibe with other strong spending data. |
