On Friday, US Commerce Department data had unveiled that US Consumer Spending, the lifeblood of US economy accounting for roughly a two-third of entire economic activities, had stalled in May as a global-scale shortage of chips had hurt motor vehicle purchase, however, a sweeping supply restrain among US manufacturers alongside a shift of demands towards services from goods had kept inflation soaring with the US Fed’s key inflation indicator rising further in May.
Nonetheless, a survey of the University of Michigan had revealed that its index for consumer sentiment rose last month to 85.5 following an April reading of 82.9, which has been well in alignment with Fed Chair Jerome Powell alongside US Treasury’s Janet Yellen’s view of a ‘transitory’ inflation-surge.
More importantly, consumers’ expectation that a higher inflation would be momentary, could influence US household’s spending behaviour by a substantial scale.
US Consumer spending stalls in May; inflation ticks higher
In factuality, although US Consumer Spending took a breather last month, a robust reopening of US economy alongside expectations of a transitory inflation outlook would more likely to gear up spending over coming months, suggested analysts.
According to US Commerce Department data revealed earlier in the day, US Consumer Spending remains unchanged last month, but Consumer Spending in April was revised higher to 0.9 per cent compared to a prior figure of 0.5 per cent.
Besides, Americans’ spending on services stepped up by 0.7 per cent, while expenses on goods tumbled 1.3 per cent alongside a 2.8 per cent decline in spending on motor vehicle purchases. Nevertheless, the US Fed’s core inflation indicator, US core PCE (Personal Consumption Expenditure) price index rose 0.5 per cent last month, while the so-called PCE price index-based inflation perked up as much as 3.4 per cent in May compared to the same time a year earlier.
Meanwhile, expressing a sheer optimism over a sweeping recovery in US Consumer Spending over coming months, a Chief economist at PNC Financial in Pittsburgh, Gus Faucher said following the data, “Spending growth will shift to services from goods, and drive a strong economic recovery throughout the rest of 2021 and all of 2022.
The biggest drags are higher prices for some goods and services and shortages due to production bottlenecks”.