|
|
U.S. consumers spent 0.8 percent more in August than in July, after July’s figure was revised downward to -0.1 percent, the U.S. Commerce Department reported on 1 October.
As we had forecast the more fearful people became of the Delta virus, the less they would spend. Thus, the variant fear had slowed consumers’ consumption mid-summer but with school starting again, and a bit of pent up spending urge, the rate increased, although slowly in some sectors.
Vehicle purchases slid 10 percent in August from July, due to a variety of shortages and supply chain disruptions keeping parts from reaching factories… and the high vehicle prices that many cannot afford.
Also, spending on hotels and restaurants was flat in August after rising through several previous months.
The good news: credit and debit card use during the week ending 25 September was up 19.8 percent over the same week in 2019, Bank of America figures showed, almost twice the 10.1 percent during August’s final week.
People spent more on airfare and entertainment activities, indicating that there was a bit of leisure bounce back.
Personal income edged up just 0.2 percent for the month… due to rising wages and distribution of the federal government’s child tax credits.
However, income gains were blunted by the end of the federal $300 weekly unemployment benefit for several million jobless workers, The Wall Street Journal noted.
TREND FORECAST: On the negative side, cooler weather is approaching, which could bring another wave of virus infections. And, should politicians and the bureaucrat “health officials” start spreading COVID Winter Fear, it will dampen consumer spending.
Because consumer spending comprises 70 percent or more of the U.S. economy, it always is a key indicator of the economy’s future health.
TREND FORECAST: In “Consumer Sentiment Tanks” (17 Aug 2021), we predicted accurately that as the COVID War 2.0 ramps up, the U.S. and world economies will decline during the last half of 2021 and financial organizations will reduce growth-rate forecasts for the fourth quarter of this year, and perhaps longer, for the U.S. and the world.
This resulted, in part, because consumer sentiment dropped in July as the Delta variant fears surged (“Inflation Rate Top Concern for U.S. Consumers,” 29 July 2021)
Depending on how high COVID fears continue to rise, and with the vaxxed not wanting to party with the unvaxxed or spend holidays together… it may well translate into a weak holiday selling season, slowing the economy while justifying consumers’ current gloomier outlook.
TREND FORECAST: The Street’s forecast that U.S. GDP will grow at rates “well above the long-term trend for two or three years” is not realistic. Shortages, unemployment, and skills gaps, inflation, virus fears and restrictive government COVID mandates will continue to put downward pressure on the economy.