Bloomberg News reports that for years, the households in the United States used to bail out the global economy when it required the consumer as a last resort. However, the recent spending spree of Americans has not fulfilled the same expectations this time.
Due to the pandemic, people have mostly spent on methods that help them stay at home without needing to stir. These goods include TV sets, exercise bikes, and laptops, to name a few of them. Hardly people enrolled in gyms and incurred hotel accommodation expenses, markedly observed in the United States.
Consumer Spending
Retailers like Walmart Inc. and Target Corp have amplified the fact by stuffing goods into inventories that were more than what Americans might ask for. It was seen that most of these goods were traded globally. Due to the pandemic led to the cost of these goods being pushed higher in the US and other nations. It explains why the US is said to be exporting inflation due to pandemic rebound.
This, in turn, leads to a drastic change in the global economy. In the pre-pandemic period, goods were abundant, and it was challenging to find buyers. Germany and China, which had huge surpluses in trade, earned blame for free-riding on demand and generating surplus elsewhere.
US Current Account Balance
However, there are signals that consumers in the US are refraining from spending with the Fed hiking rates to calm down inflation and bring the economy on track.
Bloomberg News reports that since the United States rates are escalating faster compared to Japan and the eurozone, the dollar is surging. In the past week, it breached parity for the first time in two decades with the euro. Due to this, goods imported from the United States, including oil and other commodities, become expensive for other nations.
According to Ana Luis Andrade, associated with Bloomberg Economics, in the United States, the household demand mainly for goods has had a bigger role. And this type of inflation does not go away on its own. And this is one of the main reasons why the Fed is anticipated to lift the rates, which will be more in comparison to the ECB or the European Central Bank. But if American consumer spending is the cause of US inflation, at least that can be fixed by the Fed.
