In September, U.S. consumer spending ground to a halt. Households were still battling the inflationary costs impacting their everyday lives. Price increases persisted at a persistent clip. As expected, the release showed that many Americans spent less this month than they did a month ago. Spending was up 0.3% from August. When accounting for inflation, it remained the same—which goes to show you just how much pressure consumers are feeling from skyrocketing costs.
September was likely to show continuing inflation, with consensus predicting a rise of 0.2% from August. What analysts were expecting Analysts were expecting inflation to rise slightly to 2.8% month-over-month, largely on the back of rising gas prices. These sky-high gasoline prices were a double-whammy, hitting transportation budgets and pushing up the broader inflation rate.
Energy and food prices, as ever, remain a strong counterinflationary force. Food inflation has shot upwards for the second month in a row. The added category that will undermine most inflation estimates is how volatile these categories are. For this reason, economists usually look at the core Personal Consumption Expenditures (PCE) price index, which strips out food and energy prices. This index is an important measure of the underlying trends in inflation, and the Federal Reserve watches its wobbles with great interest.
The spike in gas prices throughout September helped propel the CPI and other inflation measures to alarming new heights. In turn, consumers experienced a significant decline in their financial pressure, forcing a greater number of consumers to curtail nonessential expenses. Joe Brusuelas, chief economist at RSM US, remarked on the overall economic sentiment, stating:
“Based on this and recent private sector data, one cannot avoid the fact that the condition of the US household down market is sour at best and weak at worst.”
Financial picture for American families looks more and more dire. Thrifty food plan leaves no wiggle room. Inflation is still too high. Rising gas prices are dramatically influencing consumer choice and action. Yet at the same time, an unstable economic climate has kept most residents in a perilous landscape of increasing costs and fewer places to spend their money.
“Unless one lives in the upper spur of the K-shaped economy, it is easy to get the idea that at best down-market households are treading water at this time.”
The financial landscape for American households appears increasingly precarious as inflation remains stubbornly high. With gas prices influencing consumer behavior and overall economic conditions continuing to fluctuate, many residents are left navigating a challenging environment marked by rising costs and constrained spending.