US consumers pulled back sharply in July while inflation stayed stuck well above target, a combination the CEO of global financial advisory deVere Group says investors are not taking seriously enough. New Commerce Department data released today shows inflation adjusted consumer spending was flat in July, a sharp slowdown from a 0.4% gain in June. At the same time, the Personal Consumption Expenditures (PCE) price index, the gauge the Federal Reserve uses for its 2% inflation target, held its annual rate at 3.7%, above the 3.6% economists had forecast.
Core PCE, which strips out food and energy, came in at 3.3% annually. He says: “Growth is stalling while inflation refuses to fall. Put those two trends together and you get the looming spectre of stagflation.
Nigel Green says the combination puts the Federal Reserve in a genuinely difficult position heading into its next decision. This data suggests the US economy may now need both at once.” The Fed’s target range currently sits at 3.50% to 3.75%, and its next rate decision lands on 16 September. Ahead of today’s inflation data, futures markets were already leaning toward a hold rather than a cut or a hike.
Nigel Green says this report makes a hold even more likely, but for the wrong reasons. I read it as a Fed that’s run out of good options. Hiking into spending this weak risks tipping an already slowing consumer over the edge.” He says the flat spending figure deserves more attention than it is getting.
This is not a resilient economy absorbing higher rates comfortably, and investors treating it as one are misreading the data in front of them.” The deVere CEO warns against assuming the current calm in markets will hold until September. It does not cost much, but worth your attention. Choose to support open, independent, quality journalism and subscribe on a monthly basis.
By subscribing to our online newspaper, you can have full digital access to all news, analysis, and much more. You can also follow AzerNEWS on Twitter @AzerNewsAz or Facebook @AzerNewsNewspaper
Extract — continue reading at the source.
