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Consumers spent 1 percent more in June, year over year, including 1.2 percent more on services and 0.5 percent more for goods, the U.S. commerce department reported.
Household spending contracted 0.1 percent in May; consumers had satisfied their need for merchandise by then and began redirecting dollars to services, according to The Wall Street Journal.
Personal incomes rose an average of 0.1 percent in June. The personal savings rate dropped to 9.4 percent from a 2020 high above 14 percent, but remained above pre-crisis levels, the WSJ noted.
Consumer confidence also crept up slightly, according to the University of Michigan’s monthly survey, the WSJ said.
Spending on durable goods, lasting more than three years, dipped slightly, but spending on non-durables, such as clothing, rose 1.8 percent.
More recently, consumers put 11.3 percent more on their credit cards, year on year, during the four weeks ending 21 July than a year earlier, according to analytics firm Earnest Research. (See “Consumer Debt Soars,” Trends Journal, 13 July 2021.)
The volume was slightly less than the four weeks ending 30 June, just before the COVID virus’s delta variant began to take hold, Earnest said.
The virus is not the only worry.
“The chance that the pickup in inflation is not transitory…that’s a risk,” David Berson, chief economist at Nationwide Insurance, said in a WSJ interview.
Increased spending when raw materials are in short supply can push prices higher, causing workers to demand higher pay, which would force employers to charge more for their products, he warned.
TREND FORECAST: In June, personal incomes rose 0.1 percent while inflation cruised up at 3.5 percent. Therefore, in practical terms, all but the wealthy took a significant pay cut that month.
And as we noted, the Federal Reserve Bank of New York reported today that as a result of a surge in credit card spending and home purchases U.S. household debt hit nearly $15 trillion. Spiking 2.1 percent in the second quarter, it was the biggest percentage increase in seven and a half years.
Therefore, the bottom line is, the standard of living is declining. The spike in prices, plus the ramped up fighting of COVID War 2.0 will push GDP growth lower in the coming months.