Consumer spending, which accounts for almost 70% of gross domestic product (GDP), rose by 0.6% month-over-month in August, beating the consensus estimate of 0.5% and rising from 0.5% in July. On Thursday, the Commerce Department revised second quarter consumer spending to 2.5% from 1.6%, signaling resilient purchasing activity despite inflation remaining well above 2%.
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“There is no support in this report for (Fed Governor) Stephen Miran’s suggestions that policy interest rates have to be cut right away, and by a lot,” said High Frequency Economics chief economist Carl Weinberg.
Consumers Complain about Sticky Inflation
The consumer spending data, along with University of Michigan’s consumer sentiment survey, suggests that while spending continues to grow, consumers aren’t happy about inflation. During September, 44% of survey respondents mentioned that higher prices were harming their personal finances, the highest figure in a year. In addition, overall consumer sentiment fell for a third consecutive month.
With consumer spending exceeding expectations amid declining sentiment, the big question is whether prices will ease in the coming months or continue to weigh on household finances.
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