Rick Rieder, chief investment officer of global fixed income at BlackRock, shared strategies for stock investors on Barron’s Roundtable and analyzed the impact of high interest rates on inflation.
Americans continued to face high interest rates and rising prices for everyday items, leading them to curb spending in May.
Retail SalesThe Commerce Department said on Tuesday that GDP, a measure of how much consumers spent on a range of everyday items including cars, food and gasoline, rose just 0.1% in May, well below the 0.3% increase expected by LSEG economists but higher than April’s revised 0.2% decline.
Excluding volatile indicators such as gasoline and automobiles, sales rose just 0.1% last month.
The May increase wasn’t adjusted for inflation, so consumers could end up getting less value for the same amount of money spent.
A silver lining to rising interest rates: Savings account rates
Shoppers browse albums at a record store in Atlanta on February 14, 2023. (Dustin Chambers/Bloomberg via Getty Images/Getty Images)
“The mediocre retail sales numbers are probably in line with what the Fed expects and wants,” said Ted Rothman, senior industry analyst at Bankrate. “The softness we’re seeing suggests that high interest rates are suppressing demand, but not too much.”
Last month, consumers spent more on auto dealerships, electronics stores, health and personal care stores, clothing stores, and online shoppingThe biggest increases were in sporting goods, hobbies, musical instruments and bookstores, where spending increased 2.8%.
| Ticker | safety | last | change | change % |
|---|---|---|---|---|
| WMT | Walmart Inc. | 67.42 | +0.40 | +0.60% |
| High resolution | Home Depot Inc. | 349.50 | +2.66 | +0.77% |
| low | Lowe’s Companies Inc. | 228.21 | +1.39 | +0.61% |
| target | Target Corporation | 142.67 | -2.32 | -1.60% |
However, spending was restrained at furniture and home improvement stores, building supply and gardening supply stores, grocery stores, gas stations, bars and restaurants.
Inflation has risen 20% since President Biden took office.
Sales increased in eight of 13 retail categories last month.
Shoppers walk inside a store at Tysons Corner Mall on April 2, 2022 in Tysons, Virginia. (Stefani Reynolds/AFP via Getty Images/Getty Images)
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a Strong job market Strong wage gains have helped buoy consumer spending in recent months despite high inflation, but many economists predict consumers will become more cautious as student loan repayments start up again and high interest rates continue to weigh on the economy.
On top of that, more Americans are turning to credit cards to pay for basic necessities, with credit card debt hitting an all-time high early in 2024 and delinquencies on the rise.
“Consumer spending is cooling in a pretty orderly way,” said Jeffrey Roach, chief economist at LPL Financial. “So far, it appears the economy could achieve a soft landing, especially if the Fed adjusts policy quickly as conditions change.”
