The Fed needn’t worry about the US consumer when it comes to debating the merits of rate hikes Kevin Warsh would rather not deliver.
A few hours prior to Wednesday’s FOMC decision, the Commerce Department — where boss Howard Lutnick has seen his net worth almost double since accepting a cabinet-level position in Donald Trump’s second administration — said nominal spending rose 1.2% in August.
That was the strongest showing in five months and easily topped estimates. The ex-autos and gas print likewise reflected a 1.2% gain, triple the expected 0.4% advance and the best showing for that core aggregate in almost two years.
Control group sales, which economists use to refine GDP estimates, were even more impressive, rising 1.4%, almost triple the median estimate and a relief following an unexpected dive the prior month.
Only one of 13 major categories in the report showed a decline (building materials and garden equipment), and it was small. Food services and drinking places, the only services sector category in the release, showed a solid 1.2% advance.
The figures should dispense with the notion that the US consumer’s buckling under the weight of higher energy prices, although many believe that situation’s about to get materially worse.
It’s amazing what $11 trillion in paper gains will do to improve otherwise dour moods.
I’m always confused about the spending metric. How much of the increase is people buying more (as in quantity) vs people spending more for the same quantity.
Well, this is nominal spending. And one of the reasons people eye the control group metric is because it strips out cars, gas, restaurants and construction materials. You can create inflation-adjusted versions of the advance retail sales series by using different CPI aggregates to deflate it/them, but there’s not really much point given the BEA publishes the real PCE series at the end of each month.