Sumary of Americans are spending but inflation casts pall over economy:
- Americans are doing the main thing that drives the U.S. economy — spending — but accelerating inflation is casting a pall.
- A raft of economic data issued today showed the economy on solid footing, with Americans’ incomes rising and jobless claims falling to a level not seen since the Beatles were still together.
- The spike in prices for everything from gas to rent, however, will likely be the chief economic indicator Americans discuss over Thanksgiving Day dinner.
- At the same time, consumer prices rose 5% compared with the same period last year, the fastest 12-month gain since the same stretch ending in November 1990. “Although consumer confidence has declined in the fall because of high inflation, households continue to spend,” said Gus Faucher chief economist at PNC Financial.
- Pay for Americans has been on the rise with companies desperate for workers, and government stimulus checks earlier this year further padded their bank accounts.
- Analysts said the solid increase in spending in October, the first month in the new quarter, was encouraging evidence that overall economic growth, which slowed to a modest annual rate of 2.1% in the July-September quarter, will post a sizable rebound in the current quarter.
- “After experiencing one of the most severe economic shocks of the past century in 2020, the U.S. economy has displayed one of the most rapid recoveries in modern history in 2021,” Gregory Daco, chief U.S. economist for Oxford Economics, wrote in a note to clients.
- The number of Americans applying for unemployment benefits, meanwhile, dropped last week by 71,000 to 199,000, the lowest since mid-November 1969. But seasonal adjustments around the Thanksgiving holiday contributed significantly to the bigger-than-expected drop.