Consumer confidence has dropped for the third straight month. This suggests concerns about escalating costs for manufactures and retail prices for consumers – INFLATION !
Inflation is affected by consumers, producers, and government fiscal actions and policies. For example, the housing market has been surging since July. This boosts confidence, but home sales tend to slow during winter months. Store shelves are barer now than at the beginning of 2020. Thus, prices are higher for the goods available. However, sales cannot happen for goods that aren’t there or haven’t been produced. Production is suffering from the same lack of material and supply availability. Increasing costs to make good are being passed on to the retail market as well. Additionally, oil prices are increasing as other countries want more of it.
An even larger piece of the inflationary puzzle is debt. Consumers continue to consume. Thus, debt will continue to increase along with inflation. It appears the government stimulus payments were used as intended, in the market, to increase spending. But the spending didn’t stop at the end of the check proceeds. Spending is a difficult habit to break or control. The stimulus checks created an illusion of growth. However, this sort of improvement is temporary and cannot be sustained without additional, significant changes (or stimulus checks).
The crux of the current economic condition is continued and extreme over-indebtedness. Hoisington Investment Management states that there is no way out of the debt “trap as long as the overreliance on debt remains the only tool of monetary and fiscal policy.” Their sentiment is perfectly and succinctly stated in the following quote:
“More debt does not cure a subpar economy mired in a debt trap.”
Image by Markus Winkler from Pixabay
Based upon and excerpts from third quarter financial report by Monroe Vos Consulting of Houston, TX and Birmingham, AL.
Signals of Potential Lower Growth Ahead