It can be evidence that inflation is a huge drag on budgets.
According to economic forecaster Lakshman Achuthan, Wall Street is ignoring a sharp slowdown in consumer spending that will result in a disappointing Christmas season.
“There is still this narrative that the recovery is here,” the co-founder of the Economic Cycle Research Institute told CNBC’s “Trading Nation” on Wednesday. “The hope was that people would switch from goods to services and that would continue to accelerate … It didn’t happen.”
Achuthan highlights the downturn on a chart reflecting real consumer spending data from the US Bureau of Economic Analysis.
“It shows consumer spending on goods and services. And you could see that spike in the spring of ’21, and that’s right after all these economic checks,” he said. “Things have really slowed down quite a bit since then. You could see that the growth in goods is slowing. The growth in services is also slowing.”
Achuthan claims that rising housing, energy and food prices are making less money available for consumers to spend on discretionary purchases.
“I don’t think we can just pretend it doesn’t have an impact,” he said.
According to the Department of Labor, US consumer prices rose to their highest level in more than 30 years in October.
Achuthan is no stranger to inflation warnings.
On Trading Nation in October 2020, he warned that inflation was making a “piercing and sustained” comeback. Now it does not rule out stagflation, which refers to pressures that drive prices higher during periods of slow growth.
“I don’t know what a decade-long stagflation is. But I think we could have a snapshot here of what I would call cyclical stagflation,” said Achuthan. “There could be a cyclical slowdown as inflation rises. This is a snapshot. It’s like a Polaroid shot of stagflation for a while. But we have to see where the inflation cycle goes. That remains to be seen.”
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