There is good news for consumers because the latest consumer spending and income report should attribute to holding the interest rates. Contrary to this expectation, Ben S. Bernanke, the Fed’s chairman warns that inflation is continuing to remain “uncomfortably high.” He further claims that if anything, inflation will continue to escalate rather than decrease. Further going against Bernanke’s opinion, personal spending advanced far more than expected last month. There was an overall rise in spending for the year of 5%. What seems to be contributing to the discrepancy between the two opinions is that people’s spending is much too difficult to predict. Shoppers to tend to indulge when it comes to the high sales days. But it does not mean that people are overall purchasing more and instead it seems people may be more prudent with their spending this year. Also with the housing market continuing to decrease this year, shopping will need to compensate for the loss. In my opinion, shoppers will get carried away with spending as they usually do which will then compensate for the housing sales loss, and will ultimately prevent inflation from increasing.
The New York Times, Jeremy W. Peters Friday, December 1, 2006
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