Inflation and price fluctuations continue to be a significant thorn in the side of U.S. economic recovery, with U.S. consumer spending plateauing in May as Americans braced for near-future uncertainty.
The Bureau of Economic Analysis (BEA) released its monthly Personal Income and Outlays for May on Friday, reporting a personal income decrease of $414.3 billion and minimal movement in consumer spending. According to the BEA, the reduction in personal income reflects many of the federal government's stimulus and economic recovery benefits coming to an end. Prices, meanwhile, rose 3.4% year over year, reflecting an increase in prices for most goods and services aside from energy.
Despite the increase in prices and the lack of movement in income to compensate, consumers don't seem to be too concerned. As reported by Reuters, many consumers seem to share the Federal Reserve's opinion that inflation will only be a temporary setback to economic recovery. Since consumer confidence appears to be relatively well insulated for the time being, the lull in consumer spending will likely wane soon, further driving economic recovery.
"Consumers have used their stimulus payments to buy big-ticket items like cars, appliances, and building materials. Now that the economy is reopening, they are shifting their spending to services that they have not been able to enjoy during the pandemic, like dining out and travel," said Gus Faucher, Chief Economist at PNC Financial (NYSE: PNC).
Wall Street's recent bull run has been spurred on mainly by economic recovery, despite various multi-day setbacks triggered by inflation fears. Helping to spur Wall Street on is the recent surge in retail investing, which is only expected to ramp up into the near future. Retail investors, small-time investors using simple-to-use brokerage apps, have become a significant market force in 2021. Retail investor spending has stayed relatively strong even after the initial meme stock surge began to wane, likely driven by the lack of concern consumers seem to have towards inflation.