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Friday, December 3, 2021

Americans are spending, but inflation takes a toll on the economy

WASHINGTON – Americans are doing the main thing that drives the US economy – spending – but inflation is declining rapidly.

A raft of economic data released on Wednesday showed the economy on solid footing, with Americans’ incomes rising and jobless claims leveling out not seen since the Beatles were still together.

However, rising prices of everything from gas to rent will be the main economic indicator discussed by Americans over Thanksgiving Day dinner.

The Commerce Department reported that US consumer spending rose 1.3% in October. This was despite inflation rising faster in the past year than at any time in more than three decades.

The jump in consumer spending last month was more than double the 0.6% growth in September.

At the same time, consumer prices rose 5% compared to the same period last year, the sharpest 12-month increase since the same period that ended in November 1990.

“Although consumer confidence has declined due to high inflation, households have continued to spend,” said Gus Faucher, chief economist at PNC Financial.

Personal income, which provides fuel for future spending growth, rose 0.5% in October after falling 1% in September, reflecting a decline in government support payments.

Wages for Americans are rising as companies desperate for workers, and government stimulus checks from earlier this year further strained their bank accounts. That bodes well for a strong holiday season and major US retailers say they are readying after some companies, such as Walmart and Target, to make sure their shelves are full despite widespread shortages.

Analysts said the solid growth 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, would post a major rebound in . current quarter. This is expected unless the recent rise in COVID cases and concerns about inflation dampen holiday shopping.

Gregory Dako, chief US economist at Oxford Economics, wrote in a note, “After experiencing one of the most severe economic shocks of the last century in 2020, the US economy has displayed one of the most rapid improvements in modern history. ” Customer. Dako has predicted that the GDP will grow at 5.6 per cent in the current October-December period.

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Meanwhile, the number of Americans applying for unemployment benefits fell from 71,000 last week to 199,000, the lowest since mid-November 1969. But seasonal adjustments around the Thanksgiving holiday contributed significantly to the larger-than-expected decline. Unadjusted, claims actually rose by more than 18,000 to nearly 259,000.

In a cautionary note on Wednesday, the University of Michigan reported that the consumer sentiment index fell 4.3 percentage points to 67.4 this month, its lowest level since November 2011, driven by inflation concerns.

And there are regions in the US that are experiencing a surge in COVID-19 cases that could get worse as families travel to the country for the Thanksgiving holiday.

President Joe Biden on Tuesday took action to counter the hike in gasoline prices by ordering a release from the country’s Strategic Petroleum Reserve, but economists expect the move to have only minimal impact on rising gas prices.

World Nation News Deskhttps://www.worldnationnews.com
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