The sharp and saddening shift in consumer spending was on display in last week’s numbers. Big ticket imports are down, and low value imports are up. There was a 1.3% decline in the consumption of durables over the quarter. And on an annual basis, spend on durables declined 2.7%.
Households are being forced to substitute away from large purchases and luxury goods, to meet the growing cost of essentials. Household spending declined for the sixth-straight quarter. High inflation, steep interest rates and weak house prices are weighing on consumption.
Consumption on services however accelerated at the start of 2024, with a 0.5% increase. However, on an annual basis, spend on services is broadly in decline, and points to some moderation in services inflation in the coming quarters.
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