Last Month's Inflation Rate Slowed as Spending and Prices Rose, According to the Federal Reserve's Measurement

CNN, reporting from Minneapolis, reveals...

 This Thursday, the Commerce Department presented the Federal Reserve with an early gift: The inflation rate, which is the Fed's most preferred measure, had dropped to its lowest point since the beginning of 2021, and shoppers had backed off on spending.

 Thursday saw the release of data that indicated the core Personal Consumption Expenditures price index, the Federal Reserve's primary inflation measure, had grown by 0.2% in October and 3.5% over the course of the year. This index, which discounts volatile gas and food prices, was the focus of the report.

 Economists predicted this, and that is what has happened.

 The annual rate of the core PCE price index has reached its lowest point since April 2021, signifying another progression toward the Federal Reserve's aim of a 2% rate of inflation.

 In an interview with CNN, Bharat Ramamurti, a former deputy director at the National Economic Council, declared that the three-month average for core PCE was coming in at approximately 2.5%, which is very close to the target.

 Last month, the PCE index remained the same when factoring in the cost of gas and groceries; this is the first time since July 2022 that there hasn't been an increase in prices month-to-month.

 The headline index has increased by a yearly rate of 3%, the lowest it has been since the month of March this year.

 October's Personal Income and Outlays report from the Commerce Department revealed that people had restrained their expenditure.

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 The throng of people seeking out deals for Thanksgiving broke records, yet their expenditure did not.

 The National Retail Federation (NRF) recently reported that during the Thanksgiving - Black Friday weekend, sales saw a massive surge. According to their survey, approximately 164 million shoppers made purchases either in-store or online - a jump of more than 10% compared to 2020. NRF President and CEO Matthew Shay commented on the results, claiming it was “a testament to the resilience of the American consumer”.

 Last month, consumer spending rose 0.2%, a decrease in comparison to September's 0.7% expansion. Once inflation was factored out, the October real spending increase of 0.2% was only slightly lower than the previous month's 0.3% growth.

 An uptick in outlays for international trips, medical and retirement home treatments, lodgings, and fuel were the contributors to the month's rise in costs. Additionally, people decreased their expenditures on lasting items (automobiles, furnishings, electronics) and certain non-durable commodities such as clothing.

 The report stated that there was a minor rise in individual earnings of 0.2% in the past month, and the savings rate also went up slightly by 0.1 percentage points reaching 3.8%.

Vacations in Doubt

Uncertainty related to holidays has become a reality for many individuals.

 Last month's spending has proved to be consistent with the ongoing trend of individuals investing more in experiences. Bruun, a senior economist at Morning Consult, suggested that the dip on the goods side could be attributed to shoppers's expectation of discounts during the holiday season, which was shared with CNN.

 The stores were filled with shoppers over the post-Thanksgiving weekend.

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 Shoppers who are using 'Buy Now, Pay Later' services are driving holiday spending.

 The concept of purchasing goods and services now but having the option to pay for them at a later date is becoming an increasingly popular shopping trend. With the 'buy now, pay later' (BNPL) approach, customers are provided with a range of flexible payment plans that allow them to split their payments over a specific period of time. This type of shopping is becoming more and more attractive to consumers, as it helps them to manage their finances better and allows them to access items they would normally be unable to buy. This method of payment is also beneficial for retailers, as it increases their sales and helps to boost their customer loyalty.

 At the Mall of America in Bloomington, Minnesota, over 12,000 people flooded in during the first hour of Black Friday, a 20% increase from the previous year, according to Jill Renslow, the mall's Chief Business Development and Marketing Officer in an interview with CNN.

 The National Retail Federation's initial data reveals that, while shoppers still invested during the Black Friday to Cyber Monday weekend, the average amount they spent was lower than it was in 2019.

 Bruun noted that the increase in foot traffic may have implications for shoppers in a variety of ways.

 She asked if the increased price sensitivity of consumers was a sign that they were more likely to spend, or if it demonstrated something else.

Is this the end?

 Throughout 2020, American customers defied predictions that they would start to reduce their savings and become depleted.

 The most recent figures on family monetary status and expenditures, as well as survey information, appear to suggest that further deceleration is likely. Credit card balances are increasing, delinquencies are rising, student loan payments are an issue again, wage growth is decreasing, and high interest rates are making debt a costly venture.

 At the moment, the job market appears to be stable and the rate of unemployment is still lower than it has been in the past.

 In the years following the economic recession, Ramamurti states that they have managed to attain a "front of the pack" status. However, it is not sustainable to maintain a sprinting speed for a marathon, and thus they must tread forward with a steady pace.

 He stated that the trend will likely continue, unless something unexpected occurs.

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