Jim Cramer on Thursday said that a significant driver of inflation is the consumer’s desire to spend money in the reopening economy and this is something that is not reflected in the data observed by the Federal Reserve and Wall Street, according to CNBC.
“They don’t care about higher rates. They have savings because they did nothing for two years,” Cramer said, according to the CNBC report. “My biggest worry right now is that the aggregate data can’t capture the nature of this … one-time-only euphoria."
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Compared to July, the PCE price index or consumer spending for August increased by 0.3%, according to BEA statistics. Prices for goods decreased by 0.3% while prices for services increased by 0.6%.
Inflation: Inflation has been a concern that has not subsided despite back-to-back aggressive rate hikes by the U.S. Fed. Officials of the central bank have been harmonious in their call for continued fighting against inflation and this has taken an immense toll both on the stock and bond markets as well as emerging market currencies.
The SPDR S&P 500 ETF Trust SPY has lost over 21% since the beginning of 2022 while the Vanguard Total Bond Market Index Fund ETF BND has shed over 15% in the same period.
At the same time, oil prices have again moved up owing to OPEC+’s decision to trim its output by more than 2 million barrels/day. This is the time when consumers’ spending pattern assumes importance.
Cramer also pointed out that he expects consumers’ need to spend to slow eventually, although it might not happen anytime soon. “A year from now, there probably will be no euphoria. It’ll be over. They’ll have spent their excess savings. And that’s exactly when interest rates will likely be at their max,” he said according to the report.
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