Watching The Consumer

Inflation and the stock market making new highs are pulling people's savings out

Watching The Consumer
Photo by Obi - @pixel7propix / Unsplash

The summer is in full swing and yours truly went on vacation last week. We had a great time and went camping. The idea was to do something fun and cheap but we ended up spending quite a lot on food and gas. Of course, prices rise during the summer but basic items still cost way too much than they did just two years ago.

Personal consumption expenditures keep rising, they're clocking in at 18,266 billion dollars for May 2023. I can't wait to see what June and July bring but my forecast model shows a trend higher for June to 18,404 billion.  

(c) Author, data: St Louis Fed

On the bright side, personal savings rates did bounce back a bit, but they're nowhere near the rates during the COVID pandemic. Inflation and the stock market making new highs are pulling people's savings out to buy necessary items but it remains to be seen. Right now the personal savings rate is 4.6% for May 2023 and my model forecasts it to be 4.66% for June.

Why Am I Watching These Indicators?

For the simple fact of what the impact might be of the resumption of Student Loans interest in September with payments due in October of this year. The Supreme Court of the United States (SCOTUS) issued a big blow to the Biden administration right before the July 4th holiday ruling that he doesn't have the authority to forgive student loans, that's for Congress to decide.

The resumption of these loans in the face of a heated - albeit starting to cool off - inflationary environment could wreak havoc on the retail economy. People will forgo purchases from Walmart, Target, and other places to pay for gas, housing, and their student loans.

I own the retail ETF RTH and am considering "lightening my load." However, the data for June and July and further maneuvering by the Biden administration will ultimately make that decision for me.  


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