That would imply a dramatic slowdown in the overall economy since consumer spending is such a large part of the economy.
From PYMNTS.com, January 28:
When prices rise faster than incomes, consumers tend to tighten their belts and give up a few non-essential purchases, and according to the latest government data, that is exactly what’s happening right now.
This as the Commerce Department reported that personal spending snapped a six-month streak of gains in December and fell 0.6% from November, alongside a modest 0.3% month-on-month increase in personal incomes.
At the same time, the Fed-fave PCE Index (personal consumption expenditures) jumped 5.8%, a level last seen in the early 1980s, as consumers spent less on goods and more on services to end out the year on a low note.
Specifically, the data showed that the cutbacks were most pronounced in recreational goods and vehicles, as well as in other nondurable goods. such as newspapers, household supplies, games and toys, furnishings and durable household equipment.
On the service side, the Commerce Department said, healthcare was the largest contributor.
“Interestingly it was goods that fell in December while service spending rose [slightly] (adjusted for inflation),” former White House economic advisor, Harvard professor and Peterson Institute senior fellow Jason Furman said via Twitter in response to the report. “But overall the economy continues to be tilted towards goods and away from services.”....
....MUCH MORE
