According to Bank of America, consumer discretionary spending was up 2.9% in October year-over-year, but down from its September reading of 3.2%.
As the holiday season fastly approaches, a Bank of America survey found more than 20% of U.S. consumers intended to spend significantly less than last year.
What Happened: The University of Michigan reported earlier Friday the consumer sentiment index in November was down 18.8% year-over-year and 8.7% compared to October, which erased about half of the gains that had been recorded since the historic low in June.
The index for economic conditions was also down 21.5% year-over-year and 11.9% month-over-month.
The Bear: David Tinsley, senior economist at the Bank of America institute, joined CNBC's “Squawk Box” to discuss the health of the U.S. consumer ahead of the busy holiday shopping season.
Tinsley reported there was a slowdown in total card spending per household data, down from 4.4% in September to 3.1% year-over-year.
Also, Tinsely said households remain pressured due to rental increases, higher utility bills and inflation, although the October reading was cooler than expected.
Due to the savings buffers created during the COVID-19 pandemic, Tinsley said consumer spending remained robust, but was slowing. Tinsley added that the economy needed the consumer to slow down because if it doesn't, then the Fed will not take its foot off the gas.
Tinsely reported there was a slowdown in consumer discretionary spending as last year lower-income households made up nearly two-thirds of the growth in discretionary, while now it is only accounting for a fifth of the growth.
Also Read: Find Out Why Roger Ferguson, Former Fed Vice Chairman, Thinks The Market Disconnect Is 'A Bit Of A Head Scratcher'
The Bull: Mona Mahajan, senior investment strategist at Edward Jones, also joined CNBC's "Squawk Box" to discuss how investors should navigate the latest market rally based on the latest CPI print.
Mahajan reported there are signs the market is stabilizing and going through a bottoming process, as yesterday's inflation report provided optimism for the markets.
Mahajan also said the forward-looking inflation indicators for housing, rent, manufacturing prices and supply chain pressure indices were all moderating, which made the case that yesterday's print was the start of a lower trend.
Historically it took 12 to 24 months to reach a trough in inflation and two or three more prints of declining CPI could be a signal of a more sustainable recovery, Mahajan reported.
In the December Fed meeting, Mahajan expects the Fed to move at a more gradual pace with a 50 bps hike as it is headed for a terminal rate of between 5% to 5.25%, which will create uncertainty in the markets.
When the economy hits peak Fed hawkishness and peak terminal rates, the 12 months after were historically positive, which can be a positive catalyst for bond and equity investors in 2023, says Mahajan
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