Business

The personal consumption spending index rose 6.4 percent in February

Businesses are trying to navigate the tricky moment by estimating whether the increase in input costs will last a second year — and if and how to pass it on to consumers.

Chewy, the pet supply retailer, recently signed a new freight deal that will cost it more this year, and it also faced higher labor costs in the last quarter of 2021. But it’s hoping those trends won’t last, or that it can offset rising spending with efficiency gains.

“As we close the book for 2021 and move forward into 2022, we are already seeing improvements in labor availability, inbound shipping costs and pricing, while inventory levels and outbound shipping costs remain elevated,” said Sumit Singh, Chief Executive von Chewy said on a results call this week. “Ultimately, we believe that most of these challenges are not permanent.”

Other companies expect consumer demand will face some challenges this year as households pass government stimulus checks that boosted their ability to spend in 2021.

“For our business in the industry we serve, the stimulus checks are a near-term impact of last year,” Sportsman’s Warehouse chief executive Jon Barker said on a conference call this week. “And while fuel costs and inflation will certainly have an impact on our consumers’ disposable income, we actually believe and are confident that our industry is more – able to weather these changes better than most.”

Thursday’s report showed consumer spending fell in February after adjusting for inflation, falling 0.4 percent from January, a slightly larger drop than economists had expected. However, it is still rising before price increases are factored in. Personal income also continued to rise before being adjusted for inflation, as wage growth picks up where government aid leaves off.

Fiscal balance sheets remain in decent shape, although some support payments are phasing out. Many people have been paying off debt during the pandemic, and others are seeing wage increases that could help them sustain spending in the months ahead. Households of all income brackets have built up savings during the pandemic, thanks in part to government aid payments.

https://www.nytimes.com/2022/03/31/business/economy/pce-inflation-february.html The personal consumption spending index rose 6.4 percent in February

Ian Walker

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