Consumer spending rose more than expected in January—but only because prices did so as well, Bloomberg reports. Adjusted for inflation, spending remained flat for the second straight month. With fuel costs rising, banks restricting loans, and property values falling, “consumers are clearly hard-pressed to maintain their standard of living and are cutting back,” says an analyst.
“The big issue is the fact that inflation is accelerating, and it's taxing consumer spending,” says another economist. “The first half is not going to look all that good.” The Fed saw a 4-month-high rise in inflation of 0.3%. One homebuilder warned of a self-fulfilling prophecy, noting that “ceaseless talk of a recession” could be a culprit in falling consumer confidence.