• Personal Spending Rises With Prices, Consumer Sentiment Declines, Jobless Claims Drop

    Personal Spending Rises With Prices

    Personal spending and income both grew slightly in June from the prior month, with stubbornly high gas, food and other price inflation eating into those gains.

    The Commerce Department reported July 29 that consumers in June boosted their spending by $181.1 billion, 1.1% more than they shelled out in May. More than half of that increase, $94.9 billion, was concentrated on goods, with gasoline and other energy-related products accounting for much of the hike.

    Consumers raised their spending on services by $86.2 billion in June, with spending most pronounced for housing, healthcare and utilities. Food prices were up 1% for the month, while energy prices rose 7.5%

    Personal income in June rose $133.5 billion or 0.6% from May, continuing a trend of the past several months of income gains being outpaced by rising costs for necessities.

    Rising energy prices fueled better-than-expected earnings for the major oil companies. In the past week, Exxon, Chevron and Shell all reported record quarterly profits based on rising oil prices still being felt at gasoline pumps.

    The jury is out on the Federal Reserve’s attempts to rein in inflation with a series of hikes in its key lending rate, including the most recent 0.75% increase announced July 27. Annual inflation was at 9.1% in June, with the July number expected to be released in early August.

    Consumer Sentiment Declines

    A University of Michigan survey found consumers in July feeling in some ways even less confident about the economy than they did in June, when a closely watched index registered historic lows amid high inflation.

    The nationwide survey, gauging consumer mood using 1985 as a base score of 100, found overall consumer sentiment at 51.5, according to the latest data reported July 29. That was the second-lowest score since the surveys began in 1946, up 1.5 points from June but a drop of nearly 30 points from 81.2 in July 2021.

    For current economic conditions, the 58.1 score edged out June’s 53.8 but represented a plunge from 84.5 in July 2021. When asked about their expectations for the coming year, consumers registered a July score that hit a 13-year low of 47.3, down slightly from June’s 47.5 but a considerable drop from the 79 score a year ago.

    “The one-year economic outlook fell to its lowest reading since 2009,” survey director Joanne Hsu said in a statement July 29. “At the same time, concerns over global factors have eased somewhat.”

    Hsu said inflation continues to dominate consumers’ attention, with respondents’ median prediction for the inflation rate a year from now at 5.2%, on par with consumers’ predictions of the past two months.

    Analysts have noted that the Federal Reserve's ongoing interest rate hikes aimed at reducing inflation could also dim consumer confidence and spending appetites in the near term. That's already being seen in the form of reduced home sales.

    Jobless Claims Drop

    Initial claims for unemployment insurance totaled 256,000 for the week ended July 23, down 5,000 from the prior week in what remains a relatively strong job market with unemployment at 3.6%, the Labor Department reported July 28.

    Analysts have been watching for signs that layoffs and jobless claims might rise and contribute to an economic downturn if inflation is not brought under control soon. Those signs have been slow in coming, though Labor Department numbers showed the four-week moving average of 249,250 initial claims was 6,250 higher than the prior week’s moving average.

    The total number of continued weeks’ claims in all programs, tracked on a more delayed basis, was approximately 1.5 million for the week ending July 9. That was up 123,430 from the previous week, but well below the approximately 13.1 million claims in the comparable week of 2021.

    Source: www.CoStar.com