Has the increase in inflation slowed down consumer spending?
The recent retail sales report rose a healthy 0.5% month over month as spending showed minor damage from higher energy prices. Of the 13 major categories in the report, gas stations had the most significant gain, up a whopping 8.9%, driven by the higher gasoline prices. It is important to note that gasoline prices rose 13.3% last month, according to the Consumer Price Index report. So the higher gasoline price has probably incentivized some people to drive less on the margin. Households are probably combining trips or taking advantage of work-from-home flexibility: This is a dramatic change from pre-pandemic life. Typically, gasoline demand is inelastic; people would buy about the same amount despite the higher prices. Potentially, that is changing due to the work-from-home flexibility. There will need to be more months of data to know for sure.