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business Monday 23 May 2022
Consumers defy inflation to support economy. For how long?

By CHRISTOPHER RUGABER ers, though, to start pulling
and ANNE D’INNOCENZIO back. The national aver-
AP Business Writers age cost of a gallon of gas
WASHINGTON (AP) — With has jumped to $4.59, up
prices across the economy a painful 50%-plus from a
— from food, gas and rent year earlier, according to
to cars, airfares and hotel AAA.
rooms — soaring at their Walmart has said its shop-
fastest pace in decades, pers are visiting its gas sta-
you might think Americans tions more frequently but
would tap the brakes on filling up less each time.
spending. And Kohl’s last week report-
Not so far. Consumers as a ed a drop in the payment
whole are showing surpris- rate for its store cards after
ing resilience, not only sus- a year in which customers
taining their spending but made sizable payments.
increasing it even after ad- Higher levels of card debt
justing for inflation. In April, raise the risk of increased
the government said, retail delinquencies.
sales outpaced inflation for Dan Gabel, a musician in
a fourth straight month. It Millbury, Massachusetts,
was a reassuring sign that has pared his entertain-
consumers — the primary ment spending as costs
drivers of America’s econo- have soared far beyond
my — are still providing vital what he earns. Gabel,
support and helping allay a big-band leader and
concerns that a recession Dan Gabel, right, and fellow musicians perform in downtown Boston, Tuesday, May 10, 2022. In trombonist, is facing soar-
the photo, from left to right, are Eric Baldwin, banjo; Ed Goroza, sousaphone; Josiah Reibstein,
might be near. trombone; and Gabel, trumpet. ing prices not just for gas
Yet at the same time, there Associated Press but also for many items he
are signs that some people, needs for work — from dry
especially in lower-income and other government aid does stay strong, the Fed away from TVs, appliances clearing band uniforms to
households, are starting after the brutal pandemic might eventually have to and patio furniture and to- lubricant for maintaining
to cut back, by shifting to recession. This year, noted jack up rates even further ward luggage, restaurant instruments to the cost of
lower-priced or alternative Michelle Meyer, chief U.S. to cool the economy and gift cards and other items paper and ink to print mu-
items or by skipping some economist at the Master- slow inflation. Earlier this that reflect Americans’ in- sic scores.
purchases altogether as Card Economics Institute, month, in its quest to quell creased desire to leave To save money, Gabel, 33,
inflation shrinks their dispos- steadily surging prices have inflation, the Fed raised its home and spend. and his partner, an opera
able income. dimmed Americans’ out- benchmark rate by a half- Southwest Airlines has said singer, have dropped HBO
Last week, for example, look for the economy. percentage point and sig- that surging demand for air and Netflix. Though the mu-
Walmart, which caters to Even so, Meyer said, there naled additional large rate travel will keep it profitable sic gigs have been steady,
price-conscious consum- is some cause for optimism. hikes to come. Some fear through this year. Though Gabel now takes the train,
ers, reported that more of “There’s still plenty of rea- the economy could slide average fares jumped 32% if he can, rather than drive
them were favoring lower- sons to believe in the resil- into recession next year. in the first quarter from a when he performs out of
cost store brands of lunch ience of the consumer,” Still, several trends are driv- year earlier, the carrier said town.
meat over pricier national she said, pointing to Ameri- ing Americans’ spending, it’s seen no sign of curtailed “We’re feeling the crunch,”
brands and buying half- ca’s robust job market and including rising pay, savings demand. Gabel said. “It’s all these lit-
gallon cartons of milk rath- the solid pay increases amassed during the pan- For many people, the op- tle things that do add up.”
er than full gallons. Like- many people are receiv- demic and a rebound in portunity to travel after two Nationally, though, the
wise, Kohl’s, a mid-priced ing. “There is a certain credit card use. Those sav- years of restrictions is out- overall resilience of con-
department store, said its amount of frustration as ings and continued wage weighing the financial pres- sumer spending illustrates a
customers were spending they navigate the environ- gains, economists say, sures of higher prices. trend that can perpetuate
less on each visit. ment we’re in. But they’re could fuel healthy spend- Mike and Marsha Dyslin, inflation: Though people
All of which has spotlighted still spending.” ing throughout this year. who live in San Jose, flew hate higher prices, they
a question floating over the Consider that even while Consumers have been shift- to Washington, D.C., last often keep paying them if
economy: How long will consumer sentiment as ing much of their spending week to visit their daughter, their wages are also rising.
consumers as a whole con- measured by the Univer- away from appliances, Sarah, a graduate student “Inflation doesn’t cure it-
tinue to spend at healthy sity of Michigan plunged electronics and exercise at Georgetown University. self,” said Laura Veldkamp,
levels — even if through nearly 30% over the past equipment — the kinds “She’s been out here at a finance professor at Co-
gritted teeth — despite the year, Americans’ spend- of goods many splurged school for two years, and lumbia University. “If the
pressures they’re feeling ing outran inflation during on early in the pandemic we haven’t visited the prices of goods and wag-
from inflation near 40-year that time. Economists at while hunkered down at whole time because of CO- es rise together, then that
highs? The answer will be Michigan noted that there home — to travel, enter- VID,” Marsha Dyslin said. doesn’t necessarily bring
key to whether the nation has been a “historic discon- tainment and other servic- “Your priorities change.” down demand.”
can avoid a recession as nect” between sentiment es. The intensity of that shift To save on gas, Mike Dys- Across the economy, me-
the Federal Reserve moves and actual consumer be- has caught many retailers lin said they’ve been driv- dian wages jumped 6% in
to sharply raise borrowing havior. off guard and contributed ing their Toyota Prius more April from a year earlier,
rates. Some economists warn to some negative earnings than their SUV but other- according to the Federal
By most measures, con- that steady consumer reports. wise haven’t made major Reserve Bank of Atlanta.
sumers have downshifted spending won’t likely last Brian Cornell, Target’s changes in their spending That was the largest in-
from last year’s blowout in the face of the Fed’s ag- CEO, said that chain “did habits. crease since 1990, though
spending, which was fu- gressive credit tightening. not expect to see the dra- Soaring gas and food pric- it was below the inflation
eled by stimulus checks And if consumer spending matic shift” in spending es have led other consum- rate of 8.3%.q