According to delayed retail sales data released for the month of October, consumers in America spent approximately the same amount as they did the previous month. This was surprising because analysts had expected an uptick in spending due to the positive start that the quarter experienced despite concerns about rising costs of living.
On Tuesday, the Commerce Department published data that didn’t show an increase from the patterns captured in September. This latest report had initially been due for release around mid-November, but the government shutdown that lasted 43 days affected data collection and resulted in this late release of the report.
Many households in the U.S. are cutting back on their spending due to the pressures they face from higher food prices, costlier imported goods, rising costs of housing and skyrocketing healthcare costs. The hefty import tariffs imposed by Donald Trump haven’t helped matters either. These factors have exerted downward pressure on consumer spending, and statistics are beginning to reveal how much of an impact this is having.
President Trump, who promised to curb inflation while campaigning for office, has spent several weeks saying reports of affordability challenges are a hoax. He has also put blame on Biden for the current rising prices, and has promised, without providing solid explanations, that the different policies he is implementing will yield benefits for Americans next year.
Many economists point out that households earning lower incomes and those in the middle income bracket are being disproportionately affected by the climbing costs of living. Those with higher incomes are holding up consumer spending as they have more discretionary income to inject into clothing, hotel stays and airline travel.
For those earning lower incomes, most of their earnings are going to “keeping the lights on” and they have little left to allocate to travel and other discretionary expenditure, such as entertainment.
This situation is giving policy makers like the Fed quite a conundrum as they navigate which decisions to make as they steer the country forward. This could be partially the reason why the Fed chair Powell indicated that there is no clear picture to guide future interest rate decisions and they will act on how the situation pans out in the coming months.
For companies like Berkshire Hathaway Inc. (NYSE: BRK.A) (NYSE: BRK.B) with significant holdings in the retail sector of the country, the coming months will be closely watched as they could shape the annual performance of the firms in which they hold stock.
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