U.S. consumers
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U.S. Consumers Face this Growing Threat in 2013
U.S. consumers spent less than expected this winter, which resulted in the worst holiday retail sales since 2008. Analysts blame bad weather, but Money Morning Chief Investment Strategist Keith Fitz-Gerald disagrees. Fitz-Gerald appeared on FOX Business Network's "Varney & Co." program Wednesday morning to discuss the reasons weighing on retail sales. He said, simply put, […]
The Other CPI: What the Christmas Price Index is Telling U.S. Consumers
U.S. consumers can get a glimpse of what to expect in price changes this holiday shopping season - especially if you get your gift ideas from an old song.
The PNC Christmas Price Index, released by PNC Wealth Management (NYSE: PNC) measures the total cost of presents listed in the classic tune, "The Twelve Days of Christmas." This year, the price tag for an ambitious gift-giver buying all 364 presents hit $101,119.84, a 4.4% gain over last year's index.
This is the first time ever the total cost - which PNC calls the "True Cost of Christmas" -has risen to six digits.
Just supplying the 12th day alone, with one round of all 12 presents, would cost $24,263.18, a 3.5% increase from last year. That's almost twice as much as the 1.8% gain from 2008 to 2009, when the country was nearing the end of the recession, but not as drastic as last year's 9.2% leap.
The index is a light-hearted way to examine pricing trends; it's doubtful many shoppers are overly concerned with the price of birds and hired performers. The gifts might not be on most shoppers' lists, but what the index does represent is the various price fluctuations in our economy.
"Typically we see parallels between our index and the Federal government's," James Dunigan, managing executive of investments for PNC Wealth Management, wrote in the Index release.
The U.S. government's consumer price index in October was up 3.5% from last year, the same increase the Christmas song's shopper would see for one day's worth of presents. PNC also calculates a "core" index like the Federal government does. While the official core CPI is 2.0%, PNC's Christmas core, which excludes the volatile price of swans, is only up 0.7%.
The bird-heavy gift list in the song made for some double-digit price increases due to this year's rising feed costs. The biggest gainers: A 25% jump in the cost of two turtledoves, and a 14.2% increase to buy a partridge in a pear tree.
Higher commodity prices have led to higher food costs for U.S. consumers - not just bird shoppers - and along with energy have been the main cause of overall inflation this year. Food inflation will continue next year, with global food prices expected to increase 4%.
The PNC Christmas Price Index, released by PNC Wealth Management (NYSE: PNC) measures the total cost of presents listed in the classic tune, "The Twelve Days of Christmas." This year, the price tag for an ambitious gift-giver buying all 364 presents hit $101,119.84, a 4.4% gain over last year's index.
This is the first time ever the total cost - which PNC calls the "True Cost of Christmas" -has risen to six digits.
Just supplying the 12th day alone, with one round of all 12 presents, would cost $24,263.18, a 3.5% increase from last year. That's almost twice as much as the 1.8% gain from 2008 to 2009, when the country was nearing the end of the recession, but not as drastic as last year's 9.2% leap.
The index is a light-hearted way to examine pricing trends; it's doubtful many shoppers are overly concerned with the price of birds and hired performers. The gifts might not be on most shoppers' lists, but what the index does represent is the various price fluctuations in our economy.
"Typically we see parallels between our index and the Federal government's," James Dunigan, managing executive of investments for PNC Wealth Management, wrote in the Index release.
The U.S. government's consumer price index in October was up 3.5% from last year, the same increase the Christmas song's shopper would see for one day's worth of presents. PNC also calculates a "core" index like the Federal government does. While the official core CPI is 2.0%, PNC's Christmas core, which excludes the volatile price of swans, is only up 0.7%.
The bird-heavy gift list in the song made for some double-digit price increases due to this year's rising feed costs. The biggest gainers: A 25% jump in the cost of two turtledoves, and a 14.2% increase to buy a partridge in a pear tree.
Higher commodity prices have led to higher food costs for U.S. consumers - not just bird shoppers - and along with energy have been the main cause of overall inflation this year. Food inflation will continue next year, with global food prices expected to increase 4%.
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U.S. Consumers Finally Bouncing Back
Consumers shed housing debt in the third quarter while ratcheting up spending elsewhere, raising hope that the single biggest driver of the U.S. economy - consumer spending - is back on the rise.
Mortgage balances fell 1.3% in the July-September period, according to data from the Federal Reserve Bank of New York, while overall household debt shrank by 0.6%.
Such reduction of debt - deleveraging in economist-speak - has over the past couple of years dampened consumer spending, which accounts for 70% of the economy. But as consumers make headway on their obligations, they have more money to spend on things other than paying down debt.
"I think it's a positive sign," Mark Zandi, chief economist at Moody's Analytics (NYSE: MCO), told The Wall Street Journal. "It means households are getting their financial house in order and that their heavy debt loads are much less weighty than they were."
In fact, consumers are so eager to get back to spending again that debt other than mortgage balances actually increased slightly, and credit card inquiries were up for the second straight quarter.
"There is a silver lining in all of this," Anthony Karydakis, chief economist at Commerzbank AG (PINK: CRZBY) in New York, told Reuters. "Slowly but steadily, consumers are exploring more normal ways of returning to a more normal pattern when it comes to borrowing habits."
The measure rose from 40.9 in October to 56 - its steepest increase since 2003. Economists had forecast a rise only to the mid-40s. Until the November reversal, the consumer confidence index had declined steadily since February.
Of course, the index is still far below 90, a level that indicates a normal, healthy economy. But at least it's finally heading up.
"This is a huge rise in consumer confidence. It gets us back to second-quarter levels and further underscores the dramatic move that we've seen in consumer spending," Lindsey Piegza, economist at FTN Financial, told Reuters.
Mortgage balances fell 1.3% in the July-September period, according to data from the Federal Reserve Bank of New York, while overall household debt shrank by 0.6%.
Such reduction of debt - deleveraging in economist-speak - has over the past couple of years dampened consumer spending, which accounts for 70% of the economy. But as consumers make headway on their obligations, they have more money to spend on things other than paying down debt.
"I think it's a positive sign," Mark Zandi, chief economist at Moody's Analytics (NYSE: MCO), told The Wall Street Journal. "It means households are getting their financial house in order and that their heavy debt loads are much less weighty than they were."
In fact, consumers are so eager to get back to spending again that debt other than mortgage balances actually increased slightly, and credit card inquiries were up for the second straight quarter.
"There is a silver lining in all of this," Anthony Karydakis, chief economist at Commerzbank AG (PINK: CRZBY) in New York, told Reuters. "Slowly but steadily, consumers are exploring more normal ways of returning to a more normal pattern when it comes to borrowing habits."
Confidence Up
An unexpected spike in the Conference Board's November consumer confidence report released on Tuesday is another sign that people are more willing to open their wallets.The measure rose from 40.9 in October to 56 - its steepest increase since 2003. Economists had forecast a rise only to the mid-40s. Until the November reversal, the consumer confidence index had declined steadily since February.
Of course, the index is still far below 90, a level that indicates a normal, healthy economy. But at least it's finally heading up.
"This is a huge rise in consumer confidence. It gets us back to second-quarter levels and further underscores the dramatic move that we've seen in consumer spending," Lindsey Piegza, economist at FTN Financial, told Reuters.
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Question of the Week: U.S. Consumers Squeezed by Inflation, Worry About Middle Class Pinch
The U.S. Federal Reserve has made one thing very clear: It views deflation as public enemy No. 1, and it will do everything in its power to keep that ruinous downward spiral in prices from taking hold.
But is the U.S. central bank focused on the wrong threat? And if that's the case, are U.S. policymakers setting the stage for a consumer-crippling inflation spike?
While the Fed has announced more quantitative easing to pump more money into the U.S. economy - hoping that would encourage lending and spending - a cadre of cash-strapped consumers is worried the stimulus measures will actually ignite long-term inflation.
There is a precedent: The current policy is similar to one taken in 2003 - 2004, when the Fed kept rates near a record low and inflation rose faster than initially predicted.
But is the U.S. central bank focused on the wrong threat? And if that's the case, are U.S. policymakers setting the stage for a consumer-crippling inflation spike?
While the Fed has announced more quantitative easing to pump more money into the U.S. economy - hoping that would encourage lending and spending - a cadre of cash-strapped consumers is worried the stimulus measures will actually ignite long-term inflation.
There is a precedent: The current policy is similar to one taken in 2003 - 2004, when the Fed kept rates near a record low and inflation rose faster than initially predicted.
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