Consumers Have Powered Through the Pandemic and Inflation - Until Now

8.1.22 -Consumers Powered Through the Pandemic and Inflation ... Until Now

Gold last traded at $1,768 an ounce. Silver at $20.29 an ounce.

NEWS SUMMARY: Precious metal prices rose Monday on bargain hunting and short covering. U.S. stocks inched higher despite growing recessionary inflation fears.

WSJ--"The past week revealed new evidence from companies and the government that household spending is increasingly strained. Families are paring back purchases of items such as electronics and furniture as prices for essentials like food and gasoline have become more expensive. Inflation drove consumer spending in June to a new four-decade high while personal incomes fell when adjusting for inflation and taxes.

Two of the country's biggest retailers, Walmart and Best Buy warned last week that a steeper-than-expected pullback in shoppers' spending would crimp their profits. The latest financial results also show that many big companies' profits have held up so far this year by passing along to consumers higher labor and fuel costs.

Consumer confidence, however, has softened. After raising interest rates for the fourth time this year to battle inflation, Federal Reserve Chairman Jerome Powell said Wednesday that people are going to the grocery store and finding that their budget no longer covers their usual shopping list.

On Thursday, the government said that the nation's gross domestic product contracted for a second consecutive quarter, raising fears that inflation and a slowdown in inventory building and the housing market are dragging the economy into a recession.

'Consumers' budgets are stretched,' said Sean Connolly, chief executive of Conagra Brands Inc., which makes Slim Jim meat snacks and Healthy Choice meals. 'It forces consumers to be very discerning about what they buy and to find the best overall value.'....

Many consumers who weathered the pandemic with the help of government stimulus and fewer expenses of their own are running out of steam. Some of them now face the return of commuting costs, a need for new work clothes and steeper child-care expenses....

Mark Zandi, chief economist of Moody's Analytics, cautions that consumer and business sentiment are so far gloomier than their actions would suggest. Although some consumers are cutting back spending on goods, it is being accompanied by increased spending on services, Mr. Zandi said. Hiring has remained strong and core business investment, excluding defense and transportation, has remained steady.

'There's all kinds of disconnects in this economy, but there's a very strong disconnect between how people say they feel and how they're behaving,' Mr. Zandi said. 'This gap between sentiment and behavior is the widest I've ever seen.'"