U.S. inflation-adjusted spending stagnates as prices surge

U.S. consumer spending, adjusted for inflation, stagnated in November as the fastest price gains in nearly four decades eroded purchasing power.

U.S. consumer spending, adjusted for inflation, stagnated in November as the fastest price gains in nearly four decades eroded purchasing power. 

Purchases of goods and services, after adjusting for higher prices, were little changed following a 0.7 per cent gain in October, Commerce Department figures showed Thursday. Unadjusted for inflation, so-called nominal spending rose 0.6 per cent, matching the median estimate of economists.

Underlying the spending figures are a series of crosscurrents. Buffeted by headlines about snarled supply chains, many Americans started their holiday shopping earlier than usual this year, helping to explain the strong advance in the prior month.

But consumers are also facing the fastest inflation in decades. With every trip to the grocery store and gas pump eating away a little more of their paychecks, people have less left over for discretionary purchases. And the new omicron variant of COVID-19 threatens to curb the incipient rebound in outlays for services.

The personal consumption expenditures price gauge, which the Federal Reserve uses for its 2 per cent inflation target, increased 0.6 per cent from a month earlier and 5.7 per cent from November 2020, the highest reading since 1982. Those figures were in line with economists’ estimates, and followed an annual increase in the Labor Department’s consumer price index that was also the fastest since 1982.

The data come on the heels of a hawkish pivot by Fed officials, who have been under pressure to take action against overheating prices. Last week the central bank announced it would accelerate the end of its asset-buying program, and new interest-rate projections indicated policy makers favor raising borrowing costs by three-quarters of a percentage point next year.