Record level consumer demand drops as high prices surge

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Record levels of consumer demand are shrinking as higher prices add to wage cuts and domestic concerns.

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Why this matters: Buyers will stop buying if goods become too expensive – a trend that if large enough can slow economic growth.

  • The latest data on retail, holiday shopping and consumer sentiment, released Friday, paints a different picture of what demand looks like and where it is headed from a year ago.

By numbers: 2021 holiday shopping season extended 14.1% from 2020 At a new record high of $886.7 billion, according to the National Retail Federation.

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yes but: Sales declined from November to December, the NRF says – a trend supported by data from the Census Bureau, which showed a decline 1.9% In those two months.

big picture: Consumer sentiment has been falling in recent months to its second lowest level in 10 years early part of the month,

  • it’s down 12.9% since last year, As more people begin to worry about the impact of higher prices on their personal finances and the government’s ability to bring those prices down.
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What are they saying: “Consumer sentiment is generally a forward-looking indicator versus retail sales, [which is] A lagging indicator,” Arun Sundaram, senior equity analyst at CFRA, told Nerdshala.

  • He said the two measurements are beginning to come together, which could mean weaker spending and retail sales in the coming months.

what to watch: personal savings.

  • The absence of financial padding in the form of increased unemployment benefits and the child tax credit has caused the personal savings rate to hit a new pandemic low of 6.9% by November.

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