US Inflation Subsides While Consumer Spending Accelerates
We finally have the fundamental data for the month of October, and it is positive for the US economy. During October, US consumer spending edged higher while inflation showed signs of moderation. As a result, the US economy got a healthy boost which the investors have been looking for since the start of 2022!
The US labor market, which is a key pillar of the economy, is also showing signs of resilience. A closer look at the unemployment benefits reveals that far fewer people made claims last week.
However, there was one indicator that disturbed the positive sentiment - Manufacturing activity during November actually contracted during November. According to experts, it has to do with the weak demand faced by the factories. That's why the economists are still worried that a mild and short recession could happen next year!
But the key thing to note here is that the average US consumer is well and very much alive. So even if we do not get a jump in retail sales during November and December, there are no signs of recession as of yet. But if we look at the comments left by major economists, it seems that the risks of recession will only appear during 2023.
If we look at consumer spending based on adjusted inflation value, it increased by 0.5%. This is the highest increase since January 2022! As for the economy, it expanded by 2.9% during the 3rd quarter, which was neither bad nor too good.
But despite the good news coming from the USA, it would be too soon to claim that inflation has come under control. Unless the inflation in the USA reaches the target set by the Fed, the risks for the US economy will remain at large. In fact, the ill effects of very high-interest rates will become even more apparent as we enter into the first few months of 2023!