China’s leaders have again pledged to give consumption a bigger role in driving growth, but economists remain unconvinced.
The emphasis given to technological self-sufficiency and advanced manufacturing has raised doubt over how high consumption is on policymakers’ To Do list.
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The numbers: A survey of consumer sentiment survey reached a 22-month high of 71.6 in July, helped by a slowdown in inflation and a robust jobs market.
The final reading of the sentiment survey slipped from a preliminary 72.6 in early July, but it was up sharply from 64.4 in June, the University of Michigan said Friday.
The consumer-sentiment survey reveals how consumers feel about their own finances as well as the broader economy.
Also read: U.S. inflation eases again, PCE shows. Prices rise at slowest pace in almost two years
The index has risen in fits and starts from an all-time low of 50 last year. The index rose to as high as 101 shortly before the onset of the pandemic in 2020.
Key details: A gauge that measures what consumers think about the current state of the economy registered 76.6 at the end of July vs. an initial 77.5.
A measure that asks about expectations for the next six months slipped to 68.3 from an initial 69.4 in early July.
Both indexes are up sharply from June, however.
Americans think inflation will average 3.4% in the next year.
Big picture: Americans are less worried about a recession. Unemployment is low, wages are rising and inflation has eased.
Yet the economy is likely to face more turbulence ahead because of higher interest rates orchestrated by the Federal Reserve to bring inflation down even further.
Higher borrowing costs usually depress business investment and consumer spending, increase layoffs and slow the economy.
Looking ahead: “Overall, the sharp rise in sentiment was largely attributable to the continued slowdown in inflation along with stability in labor markets,” said Joanne Hsu, director of the survey. “However, sentiment for lower-income consumers fell.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
rose in Friday trades.
The numbers: Consumer spending rose 0.5% in June in a sign of confidence in the economy as inflation eased again and the U.S. continued to grow.
Analysts polled by the Wall Street Journal had forecast a 0.5% increase.
Incomes advanced 0.3% in June, the government said Friday.
Consumer spending is the main engine of the U.S. economy. Households increased spending by a 1.6% annual pace in the second quarter running from April to June. Outlays have risen seven months in a row.
Key details: Americans bought more trucks last month and spent more on financial advice. They also increased spending on housing, gas utilities and recreation.
The U.S. savings rate, meanwhile, slipped to 4.3% from a 13-month high of 4.6%. Savings had fallen late last year to the lowest level since 2005.
The so-called PCE price index, the Federal Reserve’s favorite inflation barometer, rose a modest 0.2% in June. And the rate of inflation rose at the slowest pace since September 2021.
Big picture: A strong jobs market marked by low unemployment and rising wages have given Americans the confidence to spend more than enough to keep the economy growing. Services such as dining out, travel and recreation have especially benefited.
Most economists predict spending will slow, however, as rising interest rates take a bigger bite out of the economy. Whether that’s enough to eventually tip the U.S. into recession is far from clear.
Looking ahead: “Slower inflation and growing real incomes have provided some breathing room, encouraging consumers to spend on travel and recreational activities,” said senior economist Kayla Bruun of Morning Consult.
“Momentum may begin to fade as summer splurges dry up, however,” she added. “Morning Consult’s data suggests consumers are growing increasingly price sensitive across a broad range of categories.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher in Friday trades.
Is America going into a recession or not? That depends on who you ask—and how old they are.
Consumer households from their 20s to their 50s are now spending sharply less on their credit and debit cards than they were a year ago reports Bank of America, after crunching the numbers on its customers.
At this point it’s mostly those over 60, and…
The numbers: The final reading of a consumer-sentiment survey in May rebounded slightly to 59.2, but Americans remained worried about the future of the economy, especially against the backdrop of another fight in Washington over the debt ceiling.
The index, produced by the University of Michigan, registered a six-month low of 57.7 earlier in May. The index sank from 62 in April.
The consumer-sentiment survey reveals how consumers feel about their own finances as well as the broader economy.
Americans are worried about the possibility of recession and threat posed by a stalemate in talks between Democrats and Republicans on raising the U.S. debt limit. A similar impasse in 2011 also hurt consumer sentiment.
Sentiment is far below a recent peak of 88.3 in 2021 and a prepandemic high of 101. The index dropped to an all-time low of 50 last summer.
Key details: A gauge that measures what consumers think about the current state of the economy edged up to 64.9 from an initial 64.5 in May.
A measure that asks about expectations for the next six months also partly recovered to 55.4 from a preliminary 53.4 in May.
Both indexes are still quite low, however.
Inflation expectations haven’t changed much. Americans also think inflation will average just above 3% annually in the next five years.
Big picture: Higher borrowing costs have depressed purchases of houses and many other big-ticket items and put the brakes on U.S. growth. Yet even though the economy is more fragile now, there’s still no sign of a pending recession.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
rose in Friday trades.
Walmart, Alibaba, Target, and More Stocks to Watch This Week
The numbers: Consumer spending fell 0.2% at the end of 2022, indicating the U.S. economy entered the new year with fading growth prospects and rising odds of recession.
Analysts polled by The Wall Street Journal had forecast a 0.1% decline.
Incomes rose 0.2% last month, the government said Friday, a bit faster than the rate of inflation.
Key details: Americans spent less on gasoline in December after prices at the pump fell again. They also bought fewer new cars and trucks.
While they purchased fewer goods last month, consumers spent more for services. Yet most of the money went to housing, medical care and transportation — necessities that Americans would prefer to spend less on.
The U.S. savings rate rate, meanwhile, rose to 3.4% from 2.9% in the prior month. Savings had fallen late last year to the second lowest level on record going back to 1959.
Households have dipped into their savings to support their spending habits because of high inflation. The so-called PCE price index is up 5% in the past year. And the better known consumer price index has risen 6.5% in the same span.
Although inflation is slowing, prices are still rising faster than worker pay.
Big picture: Consumer spending, the main engine of the economy, sputtered toward the end of the year. Outlays also declined in November.
High inflation ate into Americans’ budgets and rising interest rates made it more expensive to buy a car, home or other big-ticket items.
Spending is unlikely to accelerate rapidly anytime soon, leaving the economy with weaker growth propects in 2023.
The saving grace is a still-strong labor market that’s kept most Americans working — and earning a paycheck.
Looking ahead: “A number of indicators are flashing red lights that a recession may be upon us,” said chief economist Bill Adams of Comerica. But “more data is needed to suss out whether the economy has definitively reached a turning point.”
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open lower in Friday trades.
The numbers: Consumer spending rose a tepid 0.1% in November, suggesting greater caution by households and heavy discounting in the holiday shopping season.
Analysts polled by The Wall Street Journal had forecast a 0.2% increase.
Incomes climbed 0.4% last month, the government said Friday, a bit faster than the rate of inflation.
Key details: Americans spent less on goods in November, especially new cars and trucks. Higher interest rates have put a dent in car sales while excess inventories forced companies to cut the prices of other products.
Consumers may have also started their holiday shopping early, economists say. Spending rose a sharper 0.9% in October.
Spending on services, meanwhile, increased again. Americans are spending more on things like recreation and travel and not buying as many goods as they were during the pandemic when they were cooped up at home.
The U.S. savings rate rate edged up to 2.4% last month from 2.2%, which was the second lowest savings rate on record going back to 1959.
Households have dipped into their savings to support their spending habits because incomes are not rising as fast as inflation.
The so-called PCE price index is up 5.5% in the past year. And the better known consumer price index has risen 7.1% in the same span.
Big picture: Consumer spending is the main engine of the economy, but it might be starting to sputter in the face of rising interest rates. The Federal Reserve has jacked up rates to try to tame inflation.
What’s likely to keep spending going up for the time being is a strong jobs market. If layoffs increase and unemployment rises, however, the economy is bound to suffer.
Higher borrowing costs depress the economy by making it more expensive to buy a home or car or take out a loan.
Looking ahead: “It seems reasonable to expect people to become more cautious, now that they have run down about half of their accumulated pandemic savings, and labor market conditions are softening,” said chief economist Ian Shepherdson of Pantheon Macroeconomics.
Market reaction: The Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
were set to open higher in Friday trades.
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For many people living in the U.S., these are tough — and confusing — times.
On Friday, the Labor Department reported 263,000 new jobs in November, while the unemployment rate held steady at 3.7%. Layoffs remain low, despite mass job cuts in the tech sector. Average hourly wages have also risen 5.1% in the past year, but still lag behind inflation for many workers. And there were 10.3 million job openings in October — slightly down from the previous month’s 10.7 million.
Some people might see the latest economic data as both challenging and confusing.
After all, the cost of living rose 7.7% on the year in October. The once red-hot housing market is finally cooling, thanks to mortgage rates that have more than doubled over the last year amid the Federal Reserve’s attempts to rein in inflation, and rents, while moderating, have surged from pre-pandemic levels. Borrowing money to cover increased precarity is becoming more expensive too, with the average credit-card APR at 19.2% as of Nov. 30, according to Bankrate.
“‘It’s just mind-boggling, the disconnect that we’ve seen.’”
Given all the conflicting signals, economists say it can be difficult for consumers to know exactly how to feel about the economy right now. “It’s not new, this disparity between the actual facts on the ground about what’s going on in the economy and the sentiment,” said Heidi Shierholz, president of the Economic Policy Institute, a left-leaning think tank.
“I remember this summer it was just unambiguously the strongest jobs recovery we’ve had in decades,” she added. “There’s just absolutely zero chance that we were in a recession — not only were we not in a recession, we were in just an extraordinarily fast recovery — and the polling, a huge share of people actually thought we were in a recession. It’s just mind-boggling, the disconnect that we’ve seen.”
Still, the fact that inflation is eating into people’s savings — and that essential goods like food, energy and housing have spiked in cost — is bound to make many people unhappy.
“Going into the pandemic, more than seven out of every 10 extremely low-income renters were already spending more than half of their income on rent. And then the pandemic hits; we saw a lot of low-wage workers lose their jobs and see an income decline,” said Andrew Aurand, vice president for research at the National Low Income Housing Coalition. “Then in 2021, we see this huge spike in prices. For a variety of reasons, they’ve struggled for a long time, and since the pandemic, it’s gotten even worse.”
Moderate-income Americans are struggling too. Maybe you can’t afford your favorite family meals, as the price of grocery store and supermarket purchases has jumped by 12.4% from last year. Or maybe you’re putting off a trip to see family this holiday season thanks to the higher cost of airfare, or you’re worried about losing your job as some business leaders warn of a recession. Perhaps you’re forced to rely on credit cards and personal loans, as credit-card debt is up 15% from a year ago.
MarketWatch has chronicled many of these changes, detailing renters’ frustrations, families’ tough choices at the grocery store, and the reality faced by would-be home buyers sidelined by higher rates and dwindling affordability.
But we would like your help telling an ongoing story about the American economy, centering the experiences of everyday people. Our readers know better than anyone about how today’s economic conditions have impacted their daily lives.
Rent growth is beginning to cool. But it’s descending from a heck of a peak.
Rental prices climbed 7.2% between September 2021 to September of this year, the largest annual increase since 1982, according to consumer price data released Thursday. Overall, shelter costs were also among the most significant drivers in rising consumer prices, along with the cost of food and medical care, the Labor Department said.
Still, it’s not all bad news for tenants. A new report from Realtor.com out Thursday found that nationwide, median rental prices in 50 large metros grew at their slowest annual pace in 16 months in September — at 7.8%. That marked the second consecutive month of single-digit year-over-year growth for 0-2 bedroom properties, and it meant that median asking rents fell by $12 in a month, Realtor.com said.
Housing inflation in the Consumer Price Index lags trends in the rental market, though, meaning the slowdown in rent growth might not register in the data for a while.
While median rental prices are still nearly 23% higher than they were two years ago, they’re no longer climbing at breakneck speeds with no end in sight. These days, economists say, that counts as a silver lining.
“After more than a year of double-digit yearly rent gains and nearly as many months of record-high rents, it’s especially important to see consistency before we confirm a major shift like the recent rental market cool-down,” Realtor.com Chief Economist Danielle Hale said in a statement. “But September data provides that evidence, as national rents continued to pull back from their latest all-time high registered just two months ago.”
“This return of more seasonal norms indicates that rental markets are charting a path back toward a more typical balance between supply and demand, compared to the previous year,” Hale added. “We expect rent growth to keep slowing in the months ahead, partly driven by the impact of inflation on renters’ budgets.”
Affordability, however, is worsening, Realtor.com said. Blame the fact that consumer prices are rising faster than wages.
(Realtor.com is operated by News Corp
NWSA,
subsidiary Move Inc., and MarketWatch is a unit of Dow Jones, which is also a subsidiary of News Corp.)
A Redfin
RDFN,
report out Thursday, meanwhile, said rents grew 9% year-over-year in September — the slowest pace since August 2021. Rents were still way up year-over-year in cities like Oklahoma City (24.1%), Pittsburgh (20%), and Indianapolis (17.9%.)