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Consumer Spending Stalls as Inflation Hits New Highs

US retail sales were stagnant in September while consumer prices remain at a 40-year high.
Consumer Spending Stalls as Inflation Hits New Highs

U.S. retail spending stalled in September as shoppers faced high inflation and rising interest rates, reports the Wall Street Journal.  

Retail Spending Was Flat in September Amid High Inflation (Wall Street Journal)

Excerpt from the Wall Street Journal: Retail sales—which comprise consumer spending mostly on goods like furniture, vehicles and groceries but also at restaurants—were unchanged last month from August, down from a revised 0.4% increase in August from July, the Commerce Department said Friday. Excluding gasoline and autos, retail sales grew by 0.3% in September from the prior month. Sales at gasoline stations, a proxy for spending by car owners, declined 1.4% last month from August but remained 21% higher than a year before. Gasoline prices dropped in September for the third month in a row, falling 4.9% from August. That is down from a June peak of just over $5 a gallon. Spending declined in categories linked to big purchases like cars, televisions, beds and golf clubs. Purchases at electronics and appliance stores declined 0.8% in September while spending at furniture stores fell 0.7%.
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According to the New York Times, the Consumer Price Index report for September, released Thursday, showed that painfully rapid price increases continued to trouble Americans and bedevil the Fed.

Takeaways From Another Painful Inflation Report (New York Times)

Excerpt from the New York Times: Inflation remains relentless. The overall index climbed 8.2 percent in September versus the prior year, a slight moderation from 8.3 percent the previous month — but that was because gasoline prices had fallen, a trend that has since reversed. Practically every other detail of the report was worrying. By some metrics, inflation is hitting new highs. Stripping out food and fuel to get a sense of underlying price trends, the so-called core index climbed by 6.6 percent, the fastest pace since 1982 and more than economists had expected. A long-awaited slowdown in goods prices isn’t happening as quickly as hoped, and cars are a case in point. Used car prices dropped in September, but not nearly as much as economists expected. Meanwhile, new car prices and car parts continue to increase sharply in price.
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In a related story from the Hill, Thursday’s report showing that inflation jumped higher than expected in September and that prices remain at a 40-year high comes at a bad time for Democrats, who are battling to hang onto their Senate majority and are expected to lose control of the House.

Inflation report is bad news for Democrats (Hill)

Excerpt from the Hill: Democratic senators had expressed hope throughout this year that inflation would begin to subside before the election, but the last inflation report released before Election Day shows that prices remain stubbornly high. That has fueled voters’ dissatisfaction over the direction of the country and weighed down President Biden’s approval rating, creating a stiff headwind for Democratic candidates heading into November. Much of the conversation in Washington in recent weeks has revolved around what impact the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, which struck down abortion rights, or negative media coverage of former President Trump would have on the midterm election. But the fact remains that voters’ view of the economy and inflation is negative, and that’s not likely to change over the next three-and-a-half weeks.
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And in another related story from CNN Business, mortgage rates rose again – moving even closer to 7% – hitting a 20-year high.

"We continue to see a tale of two economies in the data," said Sam Khater, Freddie Mac’s chief economist. "Strong job and wage growth are keeping consumers’ balance sheets positive, while lingering inflation, recession fears and housing affordability are driving housing demand down precipitously."

Mortgage rates hit 20-year high (CNN Business)

Excerpt from CNN Business: The 30-year fixed-rate mortgage averaged 6.92% in the week ending October 13, up from 6.66% the week before, according to Freddie Mac. It is the highest average rate since April 2002. A year ago, the 30-year fixed rate stood at 3.05%. Mortgage rates have more than doubled in the past year as the Federal Reserve pushed ahead with its unprecedented campaign of hiking interest rates in order to tame soaring inflation. The combination of the central bank’s rate hikes, investor’s concerns about a recession and mixed economic news has made mortgage rates volatile over the past several months.
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