The Consumer is Very Much Alive!

In Personal Consumption Expenditure (PCE) updates, I “always” present the data to you as “chained dollars”.  This just means it is already adjusted for inflation.  As you would guess, with inflation running “hot”, it has a negative impact on this data point.

This month the PCE reported in at -.40%.  Again, already inflation adjusted and, in my opinion, better than it appears!  For example, if we look at the last six months, the PCE, for the period, is +1.20% (Source: Bureau of Economic Analysis, April 2022).  For the same period last year, it was -1.10%.  So, here we have higher inflation impacting our PCE, yet it presents better than last year’s equal period of time when there was much less inflation.  Conclusion, people are buying “stuff” like there is no tomorrow and it is being masked by the inflation rate, which I believe will remain high for the next three years, but is likely cresting and will probably settle down around an estimated, still hot, 7% per year.

Where are they spending like there’s no tomorrow?  (Source: Mastercard Spending Pulse, March 2022)

Sales Growth Year-over-Year March 2022 vs. March 2021

Apparel                                                +16.0%

Department Stores                              +14.0%

Restaurants                                         +19.10%

In Store Retail                                     +11.20%

Jewelry                                                +11.90%

Luxury items (ex. Jewelry)                  +27.10%

Did you see that jewelry sales increase?  +11.90%!  So, I dug a touch deeper and noticed that jewelry sales since the pre-pandemic days, back in March of 2019 until March of 2022 are up 78.80%.

Let’s follow the breadcrumbs on this:

• Jewelry sales are up a lot
• Marriages will follow
• Then the second job to pay for it
• Then the house
• Then the kids
• Then the dog
• Then more jewelry sales

Consumer Spending is great versus the same point a year ago when inflation was less, yet looking forward, it also appears to be very healthy and thus, positive!

I’m interested in your thoughts, comments and observations.  Feel welcome to call, email or stop by the office and say Hi.

Respectfully,

James O. Lunney, CFP®

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