Shoppers kept up with inflation, hit the stores and logged in for Amazon’s Prime Day last month.
sales in line with inflation, which according to the Consumer Price Index also increased 3.2 percent in July, the result still ended up surprising.
“Households are in extraordinarily good financial shape,” said Stephen Stanley, chief U.S. economist at Santander. “Even now, liquid assets remain elevated by a huge margin relative to pre-pandemic norms. On top of that, a vibrant labor market is generating robust real income gains. Until one or both of those forces shift, there is every reason to believe that consumer demand will continue to rise at a healthy clip.
How long that lasts is an open question — economists project the excess could run out sometime around the end of this year. But in the meantime the read on inflation in the broader economy is becoming more complicated. The Federal Reserve has been raising interest rates to fight higher prices, but the risk is that policy makers will overdo it and, given the lagging impact of rate hikes, push the economy into a recession,A soft landing would have inflation coming down to the 2 percent target rate without a recession.
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