Robust Consumer Spending, Core Capital Goods Orders Showcase US Economic Strength (Defies Inflation Data)

Newsmax ^ | 2-25-2022

[blam]

U.S. consumer spending increased more than expected in January, offering the economy a strong boost at the start of the first quarter, but price pressures continued to mount, with annual inflation surging at rates last experienced four decades ago.

Growth prospects were further brightened by other data on Friday showing solid demand by businesses for equipment last month. The reports from the Commerce Department suggested underlying strength in the economy that could sustain the expansion as the Federal Reserve starts raising interest rates to quell inflation, and provide a shield from the fallout from Russia's invasion of Ukraine.

The first rate hike from the U.S. central bank is expected next month. Economists are anticipating as many as seven rate increases this year. Morgan Stanley boosted its first-quarter GDP growth estimate to a 5.4% annualized rate from a 3.8% pace. The economy grew at a 7.0% rate in the fourth quarter.

ECONOMY DEFIES INFLATION DATA

"The real economy appears to be in stronger health than we feared, suggesting that the Fed will push on with its planned rate hikes starting in March, although the Ukraine conflict makes a 50 basis points hike less likely," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, surged 2.1% last month after falling 0.8% in December. Spending was driven by purchases of motor vehicles, nondurable goods like apparel and recreational goods as well as outlays on heating amid freezing temperatures across many parts of the country.

But a resurgence in COVID-19 infections, fueled by the Omicron variant, undercut spending at restaurants and bars as well as at hotels and motels. Spending on air travel also fell.

Economists polled by Reuters had forecast consumer spending rebounding 1.5%.

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[Gen.Blather]

Here is a compilation of my observations of self and friends. If there was anything we wanted, we’re buying it now in anticipation of higher prices. I’m reminded of Jimmy Carter’s stagflation. If you thought you’d need something within a year or two, like a washing machine, a TV or a car, you went out and bought it because you knew the price was only going up.

[FreedBird]

Just in time for Biden state of the union address. Nobody will watch anyway.

[EvilCapitalist]

I just ordered a bottle of Trump Wine.

[packagingguy]

At work we got a price quote last fall on a new medical tray sealer. It was $26,000. Sent in another quote for the same thing, last week. Now it is $39,000. If you have surgery that cost is passed on to your insurance, then to you.

[The Antiyuppie]

There is another factor at play; people who can afford to do so are pulling ahead purchases because they are likely to be more expensive in the future. That is a contributing factor to a recession.

[LegendHasIt]

"Here is a compilation of my observations of self and friends. If there was anything we wanted, we’re buying it now in anticipation of higher prices. I’m reminded of Jimmy Carter’s stagflation. If you thought you’d need something within a year or two, like a washing machine, a TV or a car, you went out and bought it because you knew the price was only going up."

Yep, even my acquaintances who scoffed at my 'prepper' ways for years are now starting to buy stuff they think they might need in the next few years whether they need it now or not. Durable goods as well as storeable food. Gold, silver and guns too

[Sgt_Schultze]

...U.S. consumer spending increased...

One would expect absolute spending to increase as the inflation rate has increased. Just to buy the exact same thing as the previous month, one wold have to spend more money.

[Empire_of_Liberty]

I was going to offer that I am definitely in a “buying mode” for what you might call durable goods - replacement pump for the house well, and the like. If you look, now, there can still be some good values out there, as not everyone can keep up with raising the stickers.

[VanShuyten]

Is this one of those “consumer spending rose 5% in spite of the 6% inflation rate” stories?

[Robert DeLong]

They are just getting what they need before the prices go up even more for those same goods. It won’t last.

[DoughtyOne]

Seems like everyone here gets it.

The media and Biden should be calling us for help.

[Freedom_Is_Not_Free]

People are just front loading purchases to beat inflation.