In a period of more than eight years, the expenditure level has remained lower than the last quarter of this year. Most households in the states that were affected by the floods replaced the damaged automobiles but this didn’t have an effect on the rate of inflation. However, this saw most of these consumer expenditures funded from savings and this led to low savings similar to the 2008 recession period.
When you compare this to the recent stagnation in wage increase and low savings per household, it’s quite clear to conclude that this trend in expenditures is not sustainable. Basically, you can’t rely on the savings accumulated by the consumers to keep the economy going at a sustained pace.
In the US, the consumer spending accounts for more than 65% of the overall economic activity and it increased by 1% in the last quarter of this year. This increase was also a factor of higher spending on utilities per household. According to predictions, the increase was projected to be about 0.8% by it surpassed the predictions from economists.
When the forecasts were captured in the recent domestic product report, the overall consumer spending was reported to be 2.4%. When compared to annual rate from the second quarter of this year, the spending is lower with about 0.9%. This can be attributed to the rise in business spending, inventory expenses and a general drop in imports. However, the financial markets have maintained a stable position despite the changes.
Minimum core inflation
While the floods had a serious impact on several supply chains, there was minimum inflation as a result and the pressure on the prices of goods remained stable. The personal consumer expenditures are the most accurate measure for underlying inflation showed an increase of about 0.1% in the month of September.
Basically, the rate of inflation has recorded low scores for several months even when you consider that the job market is getting tight. However, it’s the consumer who has the heaviest burden when it comes to triggering the economic growth.
To some economic experts, this can be attributed to the lower costs charged by mobile phone service providers and they forecast that things will return to normalcy when the market returns to normal status. On the other hand, another faction of experts firmly believes that the current conditions are here to stay.
Strong labor markets
The increase in consumer expenditure is an indicator that the US economy is recovering from the slow down during the voting period but there is a reasons for slowing down in past according to brookings.edu. If the labor market gets stronger, this expenditure can be easily sustained in most households. It is also reported that claims for unemployment benefits are on the rise. However, there have been indications of improving trends as the volatile market is being ironed out.
As a result, the claims are getting lower and the statistics show that the labor market is getting smaller which shows that things are brightening up.
Is this trend important?
After every month, the PCE is reported and this is used to forecast the GDP for any quarter of the year. Since the consumer spending is responsible for a significant portion of the GDP, it’s a critical economic indicator. When this figure is flat, it can lead to the destruction of most businesses that are heavily reliant on high-value strategies.
This means that every company must figure out the right combination of factors if they are to retain the customers. When you have less money and more time, you can go an extra mile to get a favorable deal. On the other hand, if a low-cost store isn’t providing value to their customers they will easily go under. Consequently, a high-value store may be lucky only if a majority of the customers feel that the goods and services offered provide increased value.
High consumer spending and debt
With the current trends, most economic experts expect the Fed to halt any plans to raise the current borrowing rates. This year alone the rates have been raised two times in response to the underlying economic levels.
However, every time the economy is doing well there are multiple nation 21 loans’ lenders who are more than willing to loan you some money. Nevertheless, it’s your responsibility as a borrower to seek a lender that has your interests at heart so that you get valuable loans. If you don’t have the time to go through tons of websites in search for an appropriate lender, you can use a lender matching platform to get a good match.
This trend is good but if it’s not sustained, it can slow the economic growth for a few months. Therefore, it’s important for business owners to consider the value they are offering their customers to avoid losing to the competition. You can do this by observing your competitors as well as chatting with your clients and ask what they expect in the current or coming market conditions.