Americans are spending but inflation casts pall over economy – Honolulu, Hawaii

Honolulu, Hawaii 2021-11-25 00:15:00 –

Washington >> Americans are doing the main thing that drives the US economy: spending, but accelerating inflation is in dire straits.

Numerous economic data released today show that the economy is doing well as Americans’ incomes have risen to levels not seen because the Beatles were still together and unemployed claims have fallen. Was shown.

But soaring prices for everything from gas to rent can be a major economic indicator for Americans to discuss at Thanksgiving dinners.

The Commerce Department reported that US consumer spending recovered 1.3% in October. Despite inflation, it has accelerated faster than any other point in more than 30 years in the past year.

The surge in consumer spending last month doubled from a 0.6% increase in September.

At the same time, consumer prices rose 5% compared to the same period last year. This is the fastest rise in the 12 months since the same period ended in November 1990.

Gus Faucher, Chief Economist at PNC Financial, said:

Personal income, which will drive future spending growth, fell 1% in September and then increased 0.5% in October. This reflects a decline in government funding.

Payments to Americans are increasing as businesses crave for workers, and government stimulus measures earlier this year filled their bank accounts even further. This is a sign of a strong holiday season, after major U.S. retailers have made extreme efforts to fill the shelves despite widespread shortages by some companies such as Wal-Mart and Target. , States ready.

Analysts say the solid increase in spending in October, the first month of the new quarter, slowed to a modest annual rate of 2.1% in the July-September quarter, showing a significant recovery in overall economic growth. He said he was encouraging evidence. Current quarter. Unless recent increases in COVID cases and concerns about inflation undermine holiday shopping, that is expected.

“After experiencing one of the most serious economic shocks of the last century in 2020, the US economy showed one of the fastest recovery in modern history in 2021,” said the Chief US Economist of Oxford Economics. One Gregory Dako said: client. Daco predicts that GDP will recover to 5.6% growth for the current October-December period.

Meanwhile, the number of Americans applying for unemployment benefits fell by 71,000 last week to 199,000, the lowest since mid-November 1969. However, seasonal adjustments before and after Thanksgiving holidays were significantly lower than expected. Unadjusted claims actually increased from over 18,000 to nearly 259,000.

In today’s note, the University of Michigan reported that the consumer sentiment index fell 4.3 points to 67.4 this month, the lowest level since November 2011, and inflation concerns weighed heavily.

There are also areas in the United States that are experiencing a surge in COVID-19 cases that can be exacerbated as families travel the country for Thanksgiving holidays.

President Joe Biden acted on Tuesday to counter rising gasoline prices by ordering the country to free itself from strategic petroleum reserves, but economists said the move would have minimal impact on gas prices. I expect.

The Federal Reserve Board is trying to implement an interest rate policy to achieve annual profits with a preferred price index of about 2%. However, for the past 20 years, inflation has failed to meet the Fed’s 2% inflation target.

At its November meeting, the Federal Reserve announced the start of a $ 120 billion monthly reduction in bond purchases that central banks were making to put downward pressure on long-term interest rates to revitalize the economy.

Minutes of the meeting showed that Fed officials were increasingly concerned that unwanted price pressures could last longer. Authorities should be prepared to move to ensure that inflation is out of control, to reduce bond purchases more quickly, or to start raising the Fed’s benchmark interest rates sooner. I pointed out.

The reduction in bond purchases was the first strategy to withdraw the large-scale support the Fed has provided to the economy. Economists expect the Fed’s benchmark interest rates to rise in the second half of 2022, affecting millions of consumer and corporate loans. That percentage is at a record low of 0% to 0.25% since the outbreak of the spring 2020 pandemic.

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