Consumer Spending Growth Slows: COVID, Inflation, Supply Networks Are Factors: CEI Statement

On news today that inflation rose again in November, CEI Senior Fellow Ryan Young urged policymakers to do their part by spending less:

“Consumer spending grew 0.6 percent in November but slower than October’s 1.4 percent growth. There are several possible reasons for the slower growth. One is that people adapted to supply network problems by doing some of their holiday their shopping early. To the extent consumers did this, they are still likely spending the same amount, just at different times. So October’s number is likely artificially boosted a little bit, while November’s is likely artificially depressed a little bit. That is neither good nor bad news; it is neutral.

The biggest factor, as usual these days, was likely COVID. The omicron variant made people more cautious and caused store closures and travel difficulties. Fortunately, omicron will likely have little long run effect. Some people shopped online instead of in person, and other people likely decided to save their money until omicron recedes.

Inflation is the elephant in the room, though other economic fundamentals are in good shape. People are seeing higher prices across the board, and may be holding back their spending out of frustration at those higher prices, and sticking to core purchases where possible.

Policymakers can help ease inflation by spending less—the Build Back Better bill’s demise is good news here—and allowing the Federal Reserve to bring money supply growth back in line with growth in goods and services.”