In the Federal Reserve’s statement on Wednesday, the central bank’s rate-setting committee projected no interest-rate hikes until the end of 2023.

The Fed’s Open Market Committee said that the ongoing public health crisis would continue to weigh on economic activity, employment, and inflation in the near term. While economic activity and jobs have picked up in previous months, and the Fed gave a more optimistic GDP projection, it said weak demand and lower prices for commodities like oil would keep inflation low.

The data coming out on the consumer supports that position. At least 29.6 million people in the United States are still collecting unemployment benefits. Consumer confidence was still sagging in August, with the Conference Board’s index reaching its lowest level in six years. And while August retail sales rose 6%, the increase was below expectations. It marked the fourth consecutive month of positive sales but the third straight month of waning momentum.

“A slower-than-expected pace of sales last month following a downward revision to July suggests consumers may be systematically reducing monthly purchases, particularly as federal assistance wanes and the prospect of further relief funding is far from certain,” Stifel Chief Economist Lindsey Piegza said.

While the consumer price index rose 0.4% for August, the third consecutive monthly increase, prices were up only 1.3% compared with a year earlier. The Fed’s inflation target is 2%. “Consumer prices are rebounding from the pandemic shock, but as supply shortages are resolved, upward price increases should moderate,” said Kathy Bostjancic, chief U.S. financial economist at Oxford Economics.

While spending isn’t taking off, consumers do appear to be readjusting their basket of goods back towards a pre-pandemic composition, shifting, for example, at least some expenditures back to restaurants from eating and drinking at home, Piegza said.

One area that received a boost in August was used vehicles, where prices rose 5.4%, as consumers positioned themselves to avoid mass transportation and lingering factory shutdowns interrupted new vehicle supply chains.

One explanation for lackluster consumer activity is that consumers are increasing their savings.

On a webinar, Sonal Desai, chief investment officer of the fixed income group at Franklin Templeton, said that “one concern we have about people having increased their savings is that then they’re not consuming.” However, she added, “the good news here is they’re not using all their savings to pay down debt. It’s like a buffer, which is sitting there waiting to be deployed. This, I think, is something to be optimistic about.”

The Federal Reserve now projects that the economy will shrink by 3.7% this year — better than the 6.5% contraction it forecast in June.

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