Today we had a slew of numbers for December: personal spending; personal income; consumer confidence and – the Fed’s favorite – the core personal consumption expenditures price index.
Spending was down. Boo.
Prices were up. Boo.
Income was flat. No change there, then.
Consumer confidence was down, although not as badly as people had expected. Yay, I guess.
These indicators provide a pretty accurate picture of the economy right now. And they hang together in a way that numbers often do not. I mean, if prices go up, and I can’t get a raise, I’m probably going to spend less money and you can bet I’m going to complain about it.
So this means the economy still sucks, right?
Well, maybe not. Spending was down very little, and in fact the number was better than economists had expected. So we’re still buying stuff, which is important in our ridiculously consumption-focused economy (never mind we paid for all that shopping by dipping into the piggybank: savings are down and falling).
What about those price increases? Well, they were only slightly higher, and in line with expectations. And it’s not necessarily a bad thing that we’re seeing some inflation. Marketplace’s David Gura recently quoted David Blanchflower, the Dartmouth College economist, saying at the moment, for the economy, a little bit of inflation is our friend, not our enemy. Or, as Matt Boesler put it over at BusinessInsider, inflation reports are the new jobs reports.
So this is going to sound weird – but pray for prices to keep rising. Just a wee bit.
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