Consumer spending rose a healthy 0.6% in September after rising 1% in August, the Office of Economic Analysis reported on Friday. But the report brought some red flags: purchases of large durable goods (I mean cars and appliances) fell by 0.2%, while spending on other, non-durable products increased by 0.9% – mainly because prices food and gas are growing.
This suggests that consumers are willing to continue spending, even if prices rise. However, they may retain some items with larger tickets.
The good news is that the Delta version seems to be in decline, at least for now. If the trend continues, consumers could start moving towards the end of the year again. Carmakers are reporting a mitigation of a supply chain crisis that has severely shrunk inventories – which could help lower car prices slightly and lead to some robust year-end purchases, perhaps some luxury cars with a bow on top for holiday gifts. .
If we have a December to remember, consumers will have to keep dealing with higher prices.
Merry Christmas to the shops
“As the Delta wave subsides, consumer spending increases, and the latest figures show increased hotel occupancy and restaurant visits,” said BMO senior economist Sal Guatieri.
People are returning to work, and wages are rising along with inflation. Even during the pandemic, they have amassed savings, which will give shoppers and shops a breeze on holiday, Guatieri says.
“Holiday sales look set to be very strong this year … if stores can find enough workers to deliver them,” he said.
Retail sales are expected to increase between 8.5% and 10.5% this year compared to the holiday season 2020 to a record $ 859 billion, the National Retail Federation, a retail group for retailers, said Wednesday. The number does not include car dealers, gas stations and restaurants.
Both companies reported revenue results on Thursday that did not meet Wall Street analysts ’expectations, noting that supply chain problems could strain operations in the December quarter.
Delays in shipping mean that these supply and demand scales will continue to be unbalanced. As your Professor Econ 101 told you, this means that prices will continue to rise until the end of the year.
Higher prices are “well received by customers”
However, companies are also convinced that due to limited supply and hot demand, they have the power to set prices over customers and can pass on the rising costs they face to customers.
“Consumers pay higher prices because opportunities to buy other goods are limited,” said Gus Faucher, chief economist at PNC. “If your dishwasher breaks down and you need a new one and there is a shortage of dishwashers, you are willing to pay a premium. The same goes for household products such as cleaners, toothpaste or toys. This allows companies to raise prices.”
“We haven’t noticed any significant changes in customer behavior. And I think that speaks to the strength of the customer,” Albertsons CEO Vivek Sankaran said in a call about earnings earlier this month. “We don’t see their purpose changing dramatically in the next few weeks and months.”
“If inflation stays high and it’s stronger than wage growth, it would cause consumers to be more cautious about spending,” Faucher of PNC said. “They have to eat less outside and go to the movies less. Instead of buying a steak, they’ll buy ground beef.”