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Inflation

U.S. Slouches Toward Recession as Inflation Drags Down Income and Spending in May

June 30, 2022 by John Carney Leave a Comment

Inflation took a bite out of the incomes of Americans in May and crimped consumer spending as households struggled to make ends meet, raising the prospects of a second consecutive economic contraction in the second quarter.

Personal income after taxes was up a sizeable 0.5 percent in May. After adjusting for inflation, however, personal income fell 0.1 percent. Personal income fell on a monthly basis in three out of the first five months of the year.

Compared with a year ago, after-tax, inflation-adjusted income was down 3.3 percent. This measure has declined every month this year but the early declines on an annual basis largely reflected a distortion caused by a surge in income thanks to stimulus payments and other government programs in the first half of last year.

Consumer spending climbed 0.2 percent from April before adjusting for inflation. After inflation, however, spending fell 0.4 percent, the first monthly decline since November of last year.

The new numbers, from the Commerce Department’s Personal Consumption Expenditure report, indicate that U.S. households are struggling to keep up with the rapid price increases that have inflicted the economy and sent the Federal Reserve scrambling to raise rates at a pace unprecedented in this century.

The Atlanta Fed’s GDPNOW tracker, which indicates what recent economic data imply for current economic growth but does not attempt to forecast growth based on unreleased data, indicates the economy is shrinking at a percent rate in the second quarter. The economy shrank 1.6 percent in the first quarter. As a rule of thumb, two consecutive quarters of economic contraction are considered a recession, although the official declaration of when recessions begin and end comes from an obscure committee of economists affiliated with a private organization called the National Bureau of Economic Research and is based on more complex, subjective, and less transparent analysis.

Spending on durable goods, which had been strong through much of the pandemic and lockdowns, fell 3.5 percent in May after adjustment for inflation. This had been up 1.5 percent in April and flat in March. Back in January, this surged 6.7 percent after a disappointing December holiday shopping season followed a surge of buying in October as consumers sought to avoid feared shortages and completed much of the gift purchases early. Compared with a year ago, inflation-adjusted spending on durables was down 5.6 percent. Prices of durable goods are up 6.6 percent from a year ago after a rise of 0.3 percent in May, according to the Commerce Department’s price index.

Spending on nondurable goods fell 0.6 percent after inflation. Food prices, included in nondurable goods, were up 11 percent in May and prices for nondurables overall were up 11.4 percent, according to the Commerce Department’s price index. Prices rose 1.2 percent for the month. Compared with a year ago, inflation-adjusted spending on nondurables was down one percent and prices were up 11.4 percent.

There’s been a shift in spending toward services from goods as Americans have been returning to in-office work, eating out more, traveling more, and increasing other in-person activities. This shift, however, has fallen short of the expectations of many economists and failed to rise enough to fully offset the decline in goods spending. After inflation, spending on goods rose 0.3 percent and has been up for six consecutive months. Prices of services rose 0.4 percent in May. Compared with a year ago, spending on services is up 4.7 percent after inflation and prices are up 11.4 percent.

On Wednesday, the government reported that spending on goods and services rose an annualized 1.8 percent in the first quarter, a big downward revision from the 3.1 percent pace in the previous estimate. This suggested that the consumer was already wavering under the pressure of inflation. Overall gross domestic product was revised to show an annualized decline of 1.6 percent in the first quarter, worse than the 1.5 percent decline reported in last month’s revision and the 1.4 percent in the preliminary report.

Inflation has slammed consumers’ sense of financial well-being and confidence in the economy. The University of Michigan’s widely followed survey of consumer sentiment produced its lowest reading on record in June. A Gallup Poll taken in June showed that 54 percent of Americans say economic conditions are poor—the highest share since 2009—and 85 percent say the economy is getting worse.  These are not outliers: AP-NORC poll showed that 79 percent say the economy is in poor condition. Fifty-eight percent of Americans say we are already in a recession.

This sense of financial distress has been exacerbated by the limp responses from the Biden administration and the delayed reaction of the Federal Reserve. As well, both the administration and the Fed misdiagnosed inflation as transitory, shaking public faith in their ability to understand the economy or remedy its ills.

Filed Under: Breitbart, consumer spending, Economy, incomes, Inflation, News, personal consumption expenditures, personal income, recession

Grocery Cart Inflation Jumps to Highest in 42 Years

June 30, 2022 by John Carney Leave a Comment

A key measure of inflation showed groceries in May costing American households 11 percent more this year than last year, the biggest annual price gain since December of 1980.

The Personal Consumption Expenditure price index for food showed on Wednesday that inflation has accelerated for at 11-consecutive months, picking up pace every month since June of 2021. Food prices were up 6.6 percent when the year started, eight percent in February, 9.2 percent in March, and 10 percent in April.

Compared with April, food prices were up 1.2 percent, up from one percent on a month-over-month basis in the prior month.

The recent month-over-month highs occurred in February and March, when prices rose 1.2 percent for two consecutive months. Food prices jumped 2.3 percent in April of 2020, when the lockdowns sent many families scrambling to hill cupboards. Those were the worst rates of month-over-month food inflation since a 1.8 percent gain in August 1980 and comparable to April 2008, when food prices rose 1.3 percent.

The PCE price index is closely watched by the Fed and used for its inflation targeting. Unlike the better-known Consumer Price Index, the PCE price index allows for consumer substitution, reflecting consumers switching between purchases when relative prices change. When households shift to purchase relatively less expensive foods due to inflation, for instance, that puts downward pressure on the PCE price index.

Advocates of watching the PCE price index say it better reflects changes in the cost of living for U.S. households. Critics say it overlooks the deterioration in quality of life when households are priced out of, say, top-quality goods and forced to buy lower-grade items.

The PCE price indexes has been lagging the CPI s and the gap between the two has expanded in recent months. The CPI barometer of food consumed at home showed prices are up 11.9 percent. Compared with April, the CPI gauge was up 1.4 percent.

The PCE price index for food includes only food purchased for off-premises consumption. This means it excludes purchases at restaurants or other dine-in outlets.

The overall PCE price index rose 0.6 percent compared with April, a faster pace than the 0.2 percent recorded in the prior month. Compared with a year ago, prices are up 6.3 percent, matching the prior month and February. In March, prices were up 6.6 percent on an annual basis.

The American Farm Bureau Federation recently reported that this year’s average cost for an Independence Day cookout is up by the most ever recorded and will be the most expensive on record. Prices of America’s favorite July 4th foods are up 17 percent compared with last year.

The PCE price index is compiled by the Commerce Department’s Bureau of Economic Analysis and the CPI is compiled by the Labor Deparmtent’s Bureau of Labor Statistics.

Filed Under: #Bidenflation, Breitbart, Economy, Food, Inflation, News

Portman: 'Recession Mentality' Is Already Here, I Think We'll See Recession at End of Quarter

June 30, 2022 by Ian Hanchett Leave a Comment

On Wednesday’s broadcast of CNBC’s “Closing Bell,” Sen. Rob Portman (R-OH) reacted to revised GDP numbers for the first quarter of 2022 showing the economy shrank more than previously thought by stating he thinks we will probably see a recession when there is negative growth in the second quarter and stated that “the recession mentality, unfortunately, is upon us” already because people are already paying more and cutting back due to massive amounts of inflation.

Portman stated, “I’d love to see a soft landing. … But we just saw the revised numbers for the first quarter, a lot of people don’t realize, we actually were at negative economic growth in the first quarter, and two quarters of that, technically, is a recession. So, I don’t know, nobody knows, but I suspect we’re probably going to [see] negative economic growth again. In any case, for most Americans, it sure feels like a recession already. Because they’re paying $5 for a gallon of gas because they are seeing food costs go up dramatically, clothing costs, everything. And so, for working families in Ohio, they’re already pulling back and cutting back, and so I think the recession mentality, unfortunately, is upon us.”

Follow Ian Hanchett on Twitter @IanHanchett

Filed Under: Breitbart, Clips, Economy, Inflation, News, Politics, recession, Rob Portman

Whitmer: Restricting Abortion 'Only Compounds the Pain' from Inflation

June 30, 2022 by Ian Hanchett Leave a Comment

During a portion of an interview with CNN aired on Wednesday’s broadcast of “OutFront,” Michigan Gov. Gretchen Whitmer (D) responded to a question on whether abortion will overtake issues like inflation that have hurt Democrats in the minds of voters and help Democrats in the 2022 elections by acknowledging that inflation has harmed people, but that when “you take away someone’s ability to make their healthcare decision. That only compounds the pain that families are going to feel.”

Whitmer stated, “The most important economic decision a woman makes in her lifetime is when and whether to have a child, and this court decision threatens to rip that away from every woman in the country. And it’s going to be up to governors, and that’s why this fight’s so important.”

CNN Chief National Affairs Correspondent Jeff Zeleny then asked, “Does this issue, do you think, overtake other issues, other challenges, headwinds that your party was facing?”

Whitmer responded, “Inflation’s taken a toll, the cost of gas, the cost of groceries. It’s tough. But I also know that, you take away someone’s ability to make their healthcare decision. That only compounds the pain that families are going to feel.”

Follow Ian Hanchett on Twitter @IanHanchett

Filed Under: Abortion, Breitbart, Clips, Economy, Gretchen Whitmer, Inflation, News, Politics

Breitbart Business Digest: Greedflation Narrative Destroyed

June 29, 2022 by John Carney Leave a Comment

Filed Under: #Bidenflation, Breitbart, Breitbart Business Digest, Economy, Greedflation, Inflation, Jerome Powell, News, Politics

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