Inflation slowed in December for the third straight month, but is this a trend or a temporary blip? As new government inflation data rolls in, a consumer survey of low-cost shoppers suggests spending momentum for the year ahead.
Price growth slowed by 0.1 percent in December, seasonally adjusted, according to data the U.S. Bureau of Labor Statistics (BLS) published on Thursday. Over the last 12 months, inflation rose 6.5 percent on an unadjusted basis per December’s Consumer Price Index (CPI). Down from 7.1 percent in November, the increase also represents the smallest on a 12-month basis since the period ending October 2021, BLS said.
The CPI measures price changes paid by urban consumers for a basket of consumer goods and services. The index for all items, less food and energy, rose 0.3 percent in December, after rising 0.2 percent in November. Separate indexes that saw gains from November’s data points include household furnishings and operations, up 0.3 percent, and apparel, which rose 0.5 percent in December, seasonally adjusted. December’s apparel inflation was on top of the 0.2 percent increase in November from October levels, seasonally adjusted. The largest contributor for December’s decline was the index for gasoline prices, which fell 9.4 percent.
The Consumer Confidence Index in December rose to 108.3 from 101.4 as falling gas prices at the pump helped inflation expectations fall to its lowest level since September 2021. Consumer sentiment also rose 5 percent in the University of Michigan Surveys of Consumers for December. But University of Michigan economist Joanne Hsu said that while consumers welcomed the easing of inflation, they “have reserved judgment about whether the trends will continue.”
There’s a good reason for skepticism. That’s because inflation slowed in July, August and September of 2021, only to rise again. But UBS economist Alan Detmeister said in a report that this time inflation could slow further in the coming months. “This slowing is likely to be more durable as leading indicators of inflation—such as market rents, core consumer import prices, supplier delivery times, and freight rates—have or are decreasing solidly,” he said.
A report from Wells Fargo economists Sarah House and Michael Pugliese noted that with inflation slowing from its breakneck pace in mid-2022, 75 basis point rate hikes from the Fed could be in the rearview mirror. They said the Fed will continue tightening, but that the next rate hike could rise by just 25 basis points.
A new Harris Poll Survey of 2,000 adult Americans from DailyPay and Dollar Tree found that 67 percent plan to spend the same or more in 2023 as they did in 2022 on retail purchases.
“It’s encouraging to see that Americans’ spending plans are trending upward with only a third planning to spend less this year despite these times of financial uncertainty,” Kate Cheesman, DailyPay’s vice president of customer success, said.
The survey also indicated that consumers plan to increase their in-person shopping, with three out of four, or 73 percent, indicating plans to shop the same or more in-store in 2023 versus last year. Eighty-one percent plan to shop in-store for furniture, 69 percent in-store for home goods and 65 percent in-store for apparel.
Among 700 CEOs globally and over 450 other C-suite executives, most are worried about slow growth and a possible recession this year, according to the latest C-Suite Outlook 2023 from The Conference Board. That’s a significant change from last year when a recession was No. 6 on a list of executive hangups.
Fifty-one percent of CEOs worldwide—and 60 percent of those in the U.S.—expect a tepid year ahead, with their local economies only picking back up by late this year or the middle of next. And inflation continues to keep them up at night, coming in second as their biggest external concern for 2023. In contrast, Chinese CEOs are concerned, but to a lesser degree, ranking inflation seventh overall.
And with the Fed hiking interest rates, U.S. CEOs are now more concerned about the higher borrowing costs, which ranks at No. 4 from 25th in 2022.
“While CEOs globally are looking to contain costs and reduce discretionary spending—actions typically taken during a slowdown—employees may be able to breathe a sigh of relief, as few executives are turning to layoffs,” Dana Peterson, The Conference Board’s chief economist, said. “Instead, they plan to mitigate risk by accelerating innovation and digital transformation, pursuing new opportunities in higher-growth markets, and revising business models—the three most-cited actions.”
The survey also indicated that a recession won’t prompt most U.S. CEOs, at 55 percent, to rein in ESG investments this year. Moreover, despite heightened pushback against ESG, 71 percent of U.S. CEOs said the backlash won’t compel them to dial back their sustainability investments for the year ahead. In fact, 46 percent of CEOs globally said the climate change is already significantly impacting their business or will in the next one to five years.
And finally, the war in Ukraine has 81 percent of CEOs globally expecting more cyberattacks outside the war zone, and 68 percent of CEOs globally expecting more economic sanctions.