U.S. consumers continued to open their wallets in July, a new study from the Bureau of Economic Analysis showed on Friday, underscoring the resilience of household demand even as inflation held above the Federal Reserve’s target.
That doesn’t mean that they didn’t wince while doing it.
The Federal Reserve’s preferred inflation gauge, the personal-consumption expenditures price index, rose 0.2% on the month and 2.6% from a year earlier.
The core measure, which strips out food and energy, advanced 0.3% from June and 2.9% from a year earlier, edging higher from June’s 2.8%.
The takeaway from that? Consumers are spending more but they still have painfully high inflation, an issue which primarily affects the working and middle class, who spend more on goods than on services.
So what were consumers buying?
Mostly larger items, which include everything from cars to stocks. What weren’t they buying? Things that were optional, like travel, restaurants, or services.
That’s probably because services are starting to cost a lot more.
Respondents polled by the University of Michigan said in a separate study that they expect prices to climb 4.8% over the next year. That is compared with 4.5% in July, with consumer confidence at the lowest level since the beginning of the summer.
Essentially everything is seeing its prices go up, from leisure to entertainment, and it will likely climb higher for anything imported.
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