October 4, 2021 — Surge in SPending Signals a Sustained Recovery


US consumer spending rose in August signaling the economy is picking up as we head into the fall and winter.  Spending on goods and services was up 0.8 percent in August after a 0.1 percent decline in July.  Personal income also rose in August by 0.2 percent as a result of wage gains and child tax credits, offset by the ending of supplemental government pandemic payments. Consumer spending is expected to remain strong as people begin to dip into their accumulated savings and the robust job market will reduce the number of unemployed. Consumer spending is the biggest source of US economic growth.

The economy expanded at 6.7 percent, annualized, in the second quarter, up from 6.3 percent in the first.  Supply shortages, backups at US ports and micro-chip shortages have curtailed spending in some sectors, but once that passes, pent up demand will drive more spending into next year.  Analysts are looking at the holiday season to be robust based on surveys of consumers.  Higher than normal inflation is putting a damper on consumer sentiment, but the pundits, and the Fed, believe the current level of inflation to be transitory.