Your CNN account Log in to your CNN account But gasoline prices are highly visible indicators of inflation, so more pain at the pump could also dampen consumers’ attitudes. Economists still expect inflation to cool later in the year, despite volatile energy markets. The Consumer Price Index rose 3.7% in August from a year earlier, up from July’s 3.2% rise, largely due to higher gas prices. “Encouragingly, falling inflation should continue to provide a tailwind to real wages and avoid a retrenchment in consumer activity,” Boussour added.
However, if inflation slows in the months ahead, that could actually maintain economic activity, since it means consumers have regained some spending power. And it appears that consumers are already taking note,” wrote Lydia Boussour, senior economist at EY-Parthenon, in a note. “Slowing labor market gains and softer disposable income growth in the coming months will likely mean ongoing consumer cautiousness. That could prompt US consumers to pump the brakes on their spending. The job market is also expected to slow, which would include softer wage growth. While Goldman Sachs recently reduced its bet of a US recession, the Wall Street bank still thinks there’s a 15% chance of an economic downturn. But economists don’t expect a recession this year. The US economy is widely expected to cool in the coming months, and since consumer spending accounts for about two-thirds of economic output, a weaker economy typically means softer spending. However, he noted that “headwinds are emerging,” citing lower consumer savings and the resumption of student loan payments this fall. “Fitch continues to view the consumer as relatively healthy, supported by low unemployment and somewhat declining goods inflation,” wrote David Silverman, senior director at Fitch Ratings, in an analyst note. US consumer prices continued to rise last month - but the Fed probably won't raise ratesĭespite 11 interest rate hikes from the Federal Reserve intended to cool demand, the US economy remains on strong footing, with American shoppers still doling out cash thanks to a strong job market.īut after a summer of robust spending, US consumers are facing a number of economic challenges for the rest of the year, including student loan payments restarting and tougher lending standards, which could curb spending. (Photo by Robert Nickelsberg/Getty Images) Robert Nickelsberg/Getty Images Online retail sales in August were flat, after jumping in July due to Amazon’s Prime Day promotional event.ĬOLCHESTER, VERMONT - SEPTEMBER 6: A person goes through a note pad while shopping for items at a Costco Wholesale store on Septemin Colchester, Vermont. Sales of furniture and at specialty stores, such as those that sell sporting goods, fell 1% and 1.6% respectively. Retail spending increased across most categories, including at restaurants and grocery stores. The national average for regular gasoline stood at $3.86 a gallon on Thursday, according to AAA, the highest level in 10 months.Įxcluding sales at gasoline stations, retail spending advanced a more modest 0.2% in August from July. Spiking oil prices due to OPEC+ production cuts, strong demand and disruption from a deadly flood in Libya have pushed up prices at the pump. The increase was largely driven by spending at gas stations, which advanced 5.2% last month. It’s also well above economists’ expectation of a 0.2% increase.
That’s a slightly faster pace than July’s revised 0.5% gain, and marks the fifth straight month of growth. Retail sales, which are adjusted for seasonal swings but not inflation, rose 0.6% in August, the Commerce Department reported Thursday. US retail sales picked in August, boosted by higher gas prices, as spending on other items grew modestly.
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