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Experts Say Consumer Spending Is Main Driver for Inflation

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Economic experts are pointing to high consumer spending as the main factor driving inflation up. The increased demand for products met with low supplies is keeping prices high. In the meantime, the ongoing war in Ukraine is also helping push oil and food prices up.

RELATED: March Inflation Worse Than Ever At 8.5%, Beats February High

Consumer Spending is Pushing Inflation Rates Up

Extremely happy young lady making purchases at electronics store | Consumer Spending is Pushing Inflation Rates Up

According to economists who spoke with ABC News, inflation will persist for the next few months. Unfortunately, the government only has limited means to control inflation. In addition, consumer spending is the main driving force behind inflation. 

Traditionally, consumers spend money on services. However, the pandemic shifted consumer focus to goods instead.

Stacey Tisdale, the founder of Mind Money Media, said that manufacturers couldn’t keep up with the demand.

“You saw the challenges that manufacturers were having, because of COVID, then you saw the supply chain disruptions. And that’s kind of what’s underpinning all of this,”  she said. As a result, unmet strong demand led to an increase in prices. 

Stimulus Money Boosted Consumer Spending

Jason Furman, a Harvard professor, and former Obama economic advisor noted that consumers had lots of money at the time.

The “biggest factor driving up inflation has been extraordinarily strong demand,”  he said. Consumers saved more money in their accounts as they didn’t spend much in 2020.

In case they needed more money, banks were willing to give out loans with low-interest rates. Now, that demand became exacerbated due to higher oil prices when Russia invaded Ukraine. 

Meanwhile, David Wessel of the Hutchins Center on Fiscal and Monetary Policy at Brookings pointed at stimulus money. He said that stimulus money fueled much of the economic activity during the pandemic.

In particular, he pointed to “the American Rescue Plan in early 2021, giving everybody $1,400”.  Wessel also noted that in hindsight, “we probably put too much money in people’s pockets — they want to spend it.” 

US Had More Inflation Because They Sent Out More Money

Wessel added that the economy was unable to address the rapid increase in demand. Fiscal stimulus plus the fact that people started relaxing about COVID led to this demand.

Furman also noted that US inflation is compared to other developed nations. That’s because of stimulus funds from the government, at least in part.

“The United States has more inflation than any other major advanced economy. Probably because we’ve had a larger fiscal response. No other countries sent out checks on the scale that we did,” Furman said.

Other experts agreed that stimulus payments helped push consumer spending, which made inflation worse. However, some did not believe that mass payouts were the only cause.

The US government issued three rounds of stimulus checks to Americans during the time. Dean Baker, the senior economist of the Center for Economic and Policy Research, said other countries also experienced inflation.

He said that European countries are looking at 7.5% inflation rates, but they never gave out money.  

Government Can Only Do So Much

As consumer spending is spurring inflation levels to record levels, experts say the government can’t do much about it.

However, they all agreed that the Federal Reserve’s move to raise interest rates is a step in the right direction. “The main thing is for the Fed to raise interest rates, and to start selling off assets.

The goal of that is to make it more expensive to borrow money,” Furman said. Consumers need to hold off buying a house or a car, while businesses need to pause expansion plans.

If this happens, the economy will cool down. Once economic growth slows down, inflation will slow down as well. However, “how much it does any of those is incredibly uncertain,” Furman surmised. 

Watch the Bloomberg Markets and Finance video reporting that Consumers Keep Spending Despite Rising Inflation:

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Do you agree that consumer spending is driving up inflation? Do you also agree that excessive stimulus spending pushed consumer demand and helped cause inflation? 

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5 Comments

5 Comments

  • ROBERT says:

    ALL OUR PROBLEMS STEM FROM A WEAK, GERIATRIC, STUPID AND CORRUPT RESIDENT WHO WAS ILLEGALLY INSTALLED AS PRESIDENT THROUGH AN ELECTION MORE FRAUDULENT THAN ANY BEFORE!!!! THE ONLY GOOD THING TO BE SAID OF BIDEN IS, HE IS CONSISTENT. IF THERE IS A CHOICE TO BE MADE, BIDEN “ALWAYS” MAKES THE WRONG ONE!

  • Texas Heart Breaker says:

    HELL, THERE IS NOTHING I CAN ADD ROBERT SAID IT ALL !!!

    I AM GETTING SICK AND TIRED OF THE ILLEGITIMENT GOVERNMENT BENDING ME “OVER” !!!

    COME NOVEMBER IT’S MY TURN. BEND “OVER” NANCY PELOSI HERE I COME !!!

    “FUCK JOE THE HO BIDEN”
    AND THE REST OF HIS CROONIES !!!

  • ROBERT says:

    “EXPERT’, X, THE UNKNOWN QUANTITY.”SPURT”, A DRIP WITH PRESSURE! KEEP IN MIND THESE “EXPERTS”, ARE BIDEN’S EXPERTS. INFLATION HAS BEEN CAUSED BY BIDEN’S ANTI ENERGY PROGRAM, CUT DRILLING AND RESEARCH AND THE PRICE OF GAS SKY ROCKETS AND ANYTHING RELATED TO THE GAS SHORTAGE SKY ROCKETS ALONG WITH IT! BOTTOM LINE, ANYTHING NOT FOUND IN YOUR BACK YARD WILL EXPLODE IN PRICE INCREASES! ANY THING MANUFACTURED,ANY THING TRANSPORTED! BIDEN AND HIS DEMOCRAT FOOLS TELL US FOSSIL FUELS ARE THE ENEMY! FOR THE “GREEN”, INSERT IDIOTIC, NEW DEAL WE MUST STOP USING;PETROLEUM, NATURAL GAS AND COAL! WE WON,T STOP USING THEM, WE WILL JUST STOP PRODUCING THEM! LET SAUDI ARABIA, RUSSIA, VENEZUELA AND EVEN IRAN PRODUCE THEM AND GET RICH! THE “FLY” IN BIDEN’S OINTMENT IS THIS IS ALL ONE PLANET! OUR METHODS OF PRODUCTION ARE THE CLEANEST IN THE WORLD! ALL OTHER PRODUCERS PLUNDER AND POLLUTE MUCH MORE THAN THE US! WHAT BIDEN’S ACTION DOES IS NOT “GREEN”BUT A BLACK QUAGMIRE OF POLLUTION ELSE WHERE AND GREATER COSTS HERE AFFECTING THOSE WHO CAN LEAST AFFORD IT, THE MOST! BIDEN’S SOLUTION, EVERY ONE RUSH OUT AND BUY A $60,000 ELECTRIC VEHICLE. WHERE DOES BIDEN THINK ELECTRICITY COMES FROM?

  • San says:

    And if you buy this, they have a bridge to sell you! The Capitalist is apparently “State Run News!” I guess they call KimJung Biden to see what to print.
    Where are all of the journalists? And Dr.s? Strange times.

  • Jim McClaugherty says:

    Biden continues to print more money and give it away to other country’s and support stupid stuff like Abortion in other country’s and you want us to buy consumer spending as the cause for the rapid decline of the dollar?????? Our kids need to know the truth that every day the printing presses are running off more dollar bills under this administration and we continue to diminish the value of the dollar. Other country’s are removing the dollar as the benchmark because of this corrupt governments actions and it wont be long that the value of a barrel of oil will be priced on Chinese yuan. Its a real tragedy that our kids and grandkids will be faced with this situation very soon and Biden and his son will be laughing it up with the Devil himself.

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