Consumers actually increased their overall spending despite rising costs of inflation: AP

[FT-02 Senator A.F.E. 🇵🇸🤝🇺🇸🤝🇺🇦]

WASHINGTON (AP) — With prices across the economy — from food, gas and rent to cars, airfares and hotel rooms — soaring at their fastest pace in decades, you might think Americans would tap the brakes on spending.

Not so far. Consumers as a whole are showing surprising resilience, not only sustaining their spending but increasing it even after adjusting for inflation. In April, the government said, retail sales outpaced inflation for a fourth straight month. It was a reassuring sign that consumers — the primary drivers of America’s economy — are still providing vital support and helping allay concerns that a recession might be near.

Yet at the same time, there are signs that some people, especially in lower-income households, are starting to cut back, by shifting to lower-priced or alternative items or by skipping some purchases altogether as inflation shrinks their disposable income...

...Consider that even while consumer sentiment as measured by the University of Michigan plunged nearly 30% over the past year, Americans’ spending outran inflation during that time. Economists at Michigan noted that there has been a “historic disconnect” between sentiment and actual consumer behavior.

Some economists warn that steady consumer spending won’t likely last in the face of the Fed’s aggressive credit tightening. And if consumer spending does stay strong, the Fed might eventually have to jack up rates even further to cool the economy and slow inflation. Earlier this month, in its quest to quell inflation, the Fed raised its benchmark rate by a half-percentage point and signaled additional large rate hikes to come. Some fear the economy could slide into recession next year.

Still, several trends are driving Americans’ spending, including rising pay, savings amassed during the pandemic and a rebound in credit card use. Those savings and continued wage gains, economists say, could fuel healthy spending throughout this year.

Consumers have been shifting much of their spending away from appliances, electronics and exercise equipment — the kinds of goods many splurged on early in the pandemic while hunkered down at home — to travel, entertainment and other services. The intensity of that shift has caught many retailers off guard and contributed to some negative earnings reports.

https://apnews.com/article/economy-inflation-prices-4e671c834fb40342d544362f2bdf5791

[Del Tachi]

This won't be good for inflation (assuming it lasts, which it won't)

[Person Man]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

[sting in the rafters]

This won't be good for inflation (assuming it lasts, which it won't)

Yeah the problem is all that spending is being closed to retained earnings. In fact, it's one of the primary reasons corporate profits are continuing to outpace inflation, productivity, and wages. Same s____ happened after WWII, you can't spend blindly without external controls/procedures. Unionized workers will be (in theory) okay because that stuff is normally baked in to COLA adjustments, open-shop are boned though.

[Del Tachi]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation. 

[Ebowed]

This makes sense, as people would/should be preparing for further inflation by purchasing goods that they think will be more expensive later.  Even for bigger spends, if there is ambiguity about the mid- and long-term health of supply chains, it makes sense to try and ink contracts sooner than later, armed with the knowledge that prices are unlikely to meaningfully come down on current trends.

[Mopsus]

Well yeah, that’s because inflation is a meme. If prices are going up, but wages are going up too due to higher state minimum wages and the “labor shortage”, who cares?

[Person Man]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation.  

Of course it makes sense short term. It’s called rational irrationalism. From the folks who brought you “ I don’t want to buy anything right now because prices will keep dropping forever”. Its the same reason why you have zombie banks and businesses at the beginning of some recoveries.

[Del Tachi]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation. 

Of course it makes sense short term. It’s called rational irrationalism. From the folks who brought you “ I don’t want to buy anything right now because prices will keep dropping forever”. Its the same reason why you have zombie banks and businesses at the beginning of some recoveries.

What are you even talking about?

Prolonged periods of high inflation are not followed by deflationary ones, at least historically.  We're running hot at 8% right now, but even if the Fed gets a handle on things the goal is a stable 2-3%. 

Point being, most nominal prices are never going to return to pre-pandemic levels. 

[Benjamin Frank]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation. 

Of course it makes sense short term. It’s called rational irrationalism. From the folks who brought you “ I don’t want to buy anything right now because prices will keep dropping forever”. Its the same reason why you have zombie banks and businesses at the beginning of some recoveries.

What are you even talking about?

Prolonged periods of high inflation are not followed by deflationary ones, at least historically.  We're running hot at 8% right now, but even if the Fed gets a handle on things the goal is a stable 2-3%. 

Point being, most nominal prices are never going to return to pre-pandemic levels. 

I don't think anybody would want deflation. The hope is that for most people real wages will increase over the next few years to match the increase in prices.

[Leo]

Point being, most nominal prices are never going to return to pre-pandemic levels. 

What makes you think those pre-pandemic prices were the "correct" prices?

[Benjamin Frank]

Point being, most nominal prices are never going to return to pre-pandemic levels. 

What makes you think those pre-pandemic prices were the "correct" prices?

This wasn't asked to me, but that is an interesting question that is covered in graduate level economics: does 'supply and demand' really exist given that supply and demand are changing all the time. The concept of supply and demand assumes a statis that doesn't really exist.

However, in a practical sense, it's reasonable to assume that the market is static and so supply and demand do really exist.  So, as determined by the market, those were the 'correct' prices.  That doesn't mean they are the total prices, which includes externalities, but those were the 'correct' market based prices.

[Person Man]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation.  

Of course it makes sense short term. It’s called rational irrationalism. From the folks who brought you “ I don’t want to buy anything right now because prices will keep dropping forever”. Its the same reason why you have zombie banks and businesses at the beginning of some recoveries.

What are you even talking about?

Prolonged periods of high inflation are not followed by deflationary ones, at least historically.  We're running hot at 8% right now, but even if the Fed gets a handle on things the goal is a stable 2-3%.  

Point being, most nominal prices are never going to return to pre-pandemic levels.  

but if inflation did return to normal-ish, would purchasing power improve in the future? For example, I'm waiting until I make more money before making another major purchase, or at least get all of my bonus.

[Del Tachi]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation. 

Of course it makes sense short term. It’s called rational irrationalism. From the folks who brought you “ I don’t want to buy anything right now because prices will keep dropping forever”. Its the same reason why you have zombie banks and businesses at the beginning of some recoveries.

What are you even talking about?

Prolonged periods of high inflation are not followed by deflationary ones, at least historically.  We're running hot at 8% right now, but even if the Fed gets a handle on things the goal is a stable 2-3%. 

Point being, most nominal prices are never going to return to pre-pandemic levels. 

but if inflation did return to normal-ish, would purchasing power improve in the future? For example, I'm waiting until I make more money before making another major purchase, or at least get all of my bonus.

Purchasing power would only improve if we had a period where wage growth was consistently outpacing inflation. 

[Person Man]

Buying anything you don't need right now is irresponsible, even if you can easily afford to do so. Individuals have to be responsible, even if the market has powerful bad actors.

Buying durable goods right now is actually a great hedge against future inflation.  

Of course it makes sense short term. It’s called rational irrationalism. From the folks who brought you “ I don’t want to buy anything right now because prices will keep dropping forever”. Its the same reason why you have zombie banks and businesses at the beginning of some recoveries.

What are you even talking about?

Prolonged periods of high inflation are not followed by deflationary ones, at least historically.  We're running hot at 8% right now, but even if the Fed gets a handle on things the goal is a stable 2-3%.  

Point being, most nominal prices are never going to return to pre-pandemic levels.  

but if inflation did return to normal-ish, would purchasing power improve in the future? For example, I'm waiting until I make more money before making another major purchase, or at least get all of my bonus.

Purchasing power would only improve if we had a period where wage growth was consistently outpacing inflation.  

Well, there you go. Until there is a more just alternative and/or more perfect markets, we all must both advocate our self-interest and be personally responsible.