CONSUMER SPENDING FLAT

Falling gas prices last month gave consumers more money to spend on everyday items, especially online, where spending shot up 2.7 percent for the month.

Consumer spending overall was flat from June, the U.S. commerce department reported. 

Spending at gas stations was off 1.8 percent and vehicle sales, which make up about 20 percent of the consumer spending index, dropped 1.6 percent as dealers are still having trouble getting cars to sell.

After nine consecutive weeks of lower gas prices, “people said, ‘this is good news, let’s go shopping’,” chief economist Ian Shepherdson at Pantheon Macroeconomics said to The Wall Street Journal.

For the current quarter, consumer spending has made “a pretty good start,” he added.

Excluding gasoline and vehicle sales, consumer spending edged up 0.7 percent in July.

However, the commerce department does not adjust the reported figures for inflation. When inflation is factored in, consumers may have spent the same amount of money in July but they actually bought less stuff.

Consumers “are getting less goods for what they were spending a year ago,” Phillip Braun, a professor at Northwestern University’s Kellogg School of Management, told the WSJ.

Spending at department stores edged down 2.4 percent in July but rose 17 percent at discount stores such as Target, according to Jonathan Silver, CEO of retail research firm Affinity Solutions. 

“We’re seeing a shift to lower-cost options,” he added, such as shoppers buying store-brand items in supermarkets instead of nationally known names.

“While recent reductions in prices at the gas pump have been encouraging, [consumers’] confidence in their personal finances continues to wane,” Target CEO Christina Hennington said in a comment quoted by the WSJ.

Industrial production ticked up 0.2 percent for the month, reversing two previous months of decline. 

However, the housing market is weakening due to high prices, rising interest rates, and a shortage of houses for sale.

Home sales and new construction both lost ground last month.

TRENDPOST: Figures on consumer spending are not adjusted to reflect inflation’s erosion of people’s purchasing power.

Headlines that tout consumer spending being “resilient in the face of inflation” or spending “holding steady despite inflation,” are misleading. 

When inflation is running at 9 percent, shoppers can spend just as many dollars from one month to the next but they actually are getting 9 percent less stuff.

The fact that consumers spent just as many dollars in July as in June means that they bought less of everything, a sign that the economy is continuing to slow.