Retail sales in October had risen 8.3% over the past 12 months according to data from the Census Bureau released Wednesday, while the consumer price index, a popular measure of inflation, has risen 7.7% over the same period. The chart below shows the kinds of retail products where spending has roughly kept up with price increases, and where people have cut back. The fact that people have been able to keep on spending despite the sharp price increases for many products over the last year is a good sign for economic growth, but a worrisome one for the fight against inflation, economists said. The Federal Reserve has been ratcheting up its benchmark interest rate in hopes of discouraging borrowing and spending. That could in turn give supply and demand a chance to rebalance and the pace of price increases to slow down. “Even after adjusting for inflation, consumers are spending more,” economists Tim Quinlan and Shannon Seery said in a commentary. “It is tempting to cheer on the ‘resilience’ of the consumer, but the staying power of spending gives businesses no incentive to forgo price increases, thereby making the task of getting inflation in check more difficult for policymakers.” Credit card usage surged at a two-decade high rate over the year ending in September, data from the Federal Reserve Bank of New York showed Tuesday. That suggests people are putting more purchases on credit in order to maintain their spending habits, threatening the financial outlook for households, Seery and Quinaln said. Have a question, comment, or story to share? You can reach Diccon at dhyatt@thebalance.com.
