Weekly Updates
Weekly Updates
- US consumers are indulging their hedonistic tendencies in the most important celebration of the economic year—Black Friday. However, real spending on durable goods fell in the third quarter across several major economies.
- Over the course of this year people have switched from spending on goods to having fun, which involves spending on services. The share of spending allocated to durable goods has fallen as a result. Catastrophically negative real wage growth in the industrial economies has meant consumers have been using savings and credit to pay for food and fuel, not furniture and other fripperies. Some of the past surge in durable goods demand will have cannibalised current spending—the consumer who bought a washing machine in 2021 will not rush to buy another in 2022.
- This slowdown in demand produced an astonishingly sharp reversal of durable goods price inflation. US durable goods price inflation has fallen from almost 19% y/y to below 5% y/y in just eight months.
- Does this rapid disinflation of durable goods prices signal anything about other inflation drivers? Durable goods prices do demonstrate that inflation rates can reverse extremely quickly. However, today’s inflation is more about profit margin expansion than a transitory surge in demand. Different factors will reverse the 2022 inflation wave.
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