Not only has real per-capita consumption recovered to pre-COVID levels, but it has actually broadly returned to its pre-COVID trend at the fastest pace of any modern recession—in stark contrast to the permanent scars on consumption left by the 2008 recession. In fact, growth in real consumption of durable goods has not only vastly exceeded the pre-pandemic trend but briefly caught up with the pre-Great Recession trend, and remains high even as it hasn’t grown in several years. The 2010s saw durable goods’ share of spending sink by roughly 3% in 3 years and barely recover afterward. Not until the pandemic did durable goods consumption spending climb back to its pre-recession share of household budgets. That meant more than a decade of, effectively, household underinvestment in some of the most-important big-ticket items that provide long-term welfare and enhance people’s economic productivity—and that is being partially undone today.
- Date Posted:
- July 28, 2023
Core PCE inflation came in very low (albeit a touch above expectations), the second lowest pace of the inflationary period. If you swap in new rents for all rents you see a more pronounced slowdown (although not nearly as dramatic as the same adjustment for the CPI). This is a 2.3% annual rate over the last 3 months. In sum, this tells the same story as the CPI: inflation is slowing, there is reason to believe there will be further slowing as shelter comes down but also some worries about some of the good news being transitory. But overall the June inflation data was good news.