Imagine, for a moment, that the following hypothetical headline described the current state of our economy:
US in Recession: High Prices Drive Household Spending Down 1.2%.
We can hypothetically assume that, under those conditions, the stock market would have crashed. Jobs would have been lost, consumers would be hunkered down, and retail bankruptcies would be flourishing. There would be plenty of economic pain to go around.
Welcome to Germany as of this April. Federal officials there recently reported that the country’s GDP fell for the second quarter in a row, by definition putting the country’s economy in recession. German GDP fell 0.3% on top of a 0.5% drop in the fourth quarter.
That may not sound so bad, but couple it with that country’s blistering inflation rate (7.2% vs. 4.9% in the US), and you’ve got the elements for a chronic downturn. German household spending in April fell by 1.2%, versus the 0.4% increase in US consumer spending reported by the Commerce Department.
To many of us in the retail industry — which is two-thirds of the US economy — the relentless debate about whether and when the US will also sag into an inflation-driven recession is starting to wear thin. If nothing else, the facts continue to betray the forecasters. For starters, the retail majors turned in the first quarter (ended April 29) earnings that were, on balance, better than expected.
So, what’s really going on here?
For starters, it’s hard to capture what’s happening on the ground from a single statistic. The headline inflation number for April was 4.9% — prices a year ago versus today — but a big chunk of the increase happened a year ago. The Federal Reserve’s core personal consumption expenditures price index rose by just a tenth of a percent.
Noted financial journalist Allan Sloan recently wrote a column unpacking the inflation statistics, pointing out that by excluding the big jump last spring — old news — prices increased in the ten months from last July through this April by only 2.8%. On an annualized basis, Sloan estimates that inflation has been running closer to 3.1%, a huge difference that would likely halt the Federal Reserve’s need to raise interest rates to slow the economy.
He concludes, “During the past 9 or 10 months, depending on which metric you use, inflation has fallen sharply.”
Where the inflation meme runs out of steam is when you look at the trend in consumer spending. While Germany’s economy was sputtering, the Commerce Department reported that consumer spending increased in April by 0.8%, on top of 0.1% in February and March.
“The bottom line is that consumers still have the means to spend,” according to Well Fargo economists Tim Quinlan and Shannon Seery, as quoted by Bloomberg. “Whereas in the early days of the excess pandemic, savings afforded households the ability to splurge on goods, today a sturdy jobs market and steady real income gains are supporting consumption.”
If you still think inflation in the US is high, ask yourself whether you would drive an extra five miles today — which you may well have done a year ago when gasoline was $5 — to save 10 cents a gallon. Or consider this startling fact: adjusted for inflation, a gallon of gasoline costs less today, in terms of buying power, than it did fifty years ago.
Source: Fox Business
Indictment alleges Hells Angels attacked three Black men
Peloton's Robin Arzón Has the Self-Care Tool You Need This Fall
Deborra-Lee Furness Asked About Hugh Jackman Split on Accidental Radio Call
Bronny James misses first USC practice 2 months after cardiac arrest, but ‘doing very well’
Son reveals his four sporting GOATs – and there’s no room for his old pal Kane
Best Yoga Mat for Hot Yoga, According to Experts in 2023
Saysh Felix Runner Review: An Everyday Training Shoe for Cushiony Miles
How to Stop Protein Farts and Smelly Gas From Ruining Your Workouts
The Biggest Red Flags to Watch Out For at the Dentist
An Arms Workout With Dumbbells to Hit Your Biceps, Triceps and Shoulders
Why Rain Is Getting Fiercer on a Warming Planet
Will the ‘Cobra Kai’ Season 6 Release Date Be Impacted by the Writer’s Strike?
The Financial Hurdles Facing Legal Cannabis
‘Hard to know’ if Bruce Willis is aware of dementia condition, wife says
What Makes a Video Game Remake Actually Worth Playing?
News20 hours ago
Pelosi, Newsom knock GOP candidates ahead of California debate
Investing24 hours ago
Battle the turmoil with these elite defensive stocks loved by Wall Street
News23 hours ago
Embattled NJ Sen. Bob Menendez makes first remarks since indictment on bribery charges
News24 hours ago
Goldman Sachs gives its playbook for which stocks to buy and sell in this latest rate spike
News11 hours ago
SEAN HANNITY: The illusion has been shattered
News11 hours ago
Conflict fatigue splintering support for Ukraine
Wellness24 hours ago
I’m a Long-Distance Hiker With Ulcerative Colitis—Here’s How I Manage On and Off the Trail
News13 hours ago
Trump doesn’t buy gun after saying he wants to in South Carolina