Consumer spending up 1.1%

Overall consumer spending rose 1.1 percent in June, the Bureau of Economic Analysis said Friday. That compares with the 0.2 percent increase recorded in May. The BEA’s numbers show that consumers are still spending, albeit more strategically — cutting out unnecessary goods to afford gas and food prices driven up by inflation …………

Because consumer spending accounts for two-thirds of the U.S. economy, policymakers and economists have been closely monitoring for signs of a cool-down.

Little bit of a mixed bag there.

AW

https://www.washingtonpost.com/business/2022/07/29/consumer-…

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My spending was probably up over 50% so I’m doing my part.

PSU

Overall consumer spending rose 1.1 percent in June, the Bureau of Economic Analysis said Friday. That compares with the 0.2 percent increase recorded in May. The BEA’s numbers show that consumers are still spending, albeit more strategically — cutting out unnecessary goods to afford gas and food prices driven up by inflation

AW,

DW and I find ourselves buying less but spending more than a year ago. We pay for everything by charge card (each statement paid in full), so we can track monthly outlays very easily.

For us, the name-brand food basket items we repeatedly purchase are approaching “luxury goods” pricing. We have switched to “generic” on those items for which the store-brand tastes or performs roughly equivalent. However, even after a limited transition to generic, the food+pharmacy+cleaning supplies+paper goods we buy have collectively increased by 30% to 50% over the typical bill for the same items last year.

This morning, I saw a report (can’t find it now) illustrated by Bloomberg charts showing that the June figures include an increase in credit card purchases (rising unpaid balances) and a substantial reduction in the savings rate.

A nationwide increase in charges and a decrease in savings is absolutely 100% consistent with our own household behavior for the last year. We have NO debt, and we have gone from saving about $500-$1,000/month to saving $0/month. Accurately stated, our household cashflow situation over the last year has changed as follows:

Our monthly household out-of-pocket expenses have increased by about 30%.
Our monthly income has also increased by about 10%.
This leaves a negative approx -20% differential between growth in income and growth in outlays over the last year.

We have made up the difference by moving cash into fixed income (Treasurys and/or short-term CDs) to generate additional income. However, there still is a negative spread between our rising interest income and our ordinary monthly outlays.

This is slightly uncomfortable for us given our current investment mix, but we can easily make up the shortfall by purchasing more dividend or interest-generating assets. However, I strongly suspect that a majority of American households do not have the luxury of uninvested assets to make up the difference between escalating monthly expenses in the face of lagging income increases.

I realize that my examples may NOT be representative of a majority of households or even a majority of retirees. However, if I were a policymaker, I would be keenly concerned about whether inflation is causing discomfort to ordinary households due to an increase in essential obligations beyond the amount of additional income or benefits in the typical household.

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NH writes about inflation has affected his household expenses.

We have NO debt, and we have gone from saving about $500-$1,000/month to saving $0/month.

I, too have no debt, and was saving 500 to 1000 occasionally 1500 per month.
Now, I’m braking even. No savings from my fixed income.
I’m getting OJT of exactly what “Fixed Income” means when inflation hits!

I realize that my examples may NOT be representative of a majority of households or even a majority of retirees.

It’s very representative of my experience.

So far, I’ve not dipped into the e-fund, but I’ll be traveling some in the near future, and will use a bit for that.

I’m VERY grateful for TMF and the financial education I’ve gotten here, over the last 2+ decades.

:alien:
ralph

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