Inflation Just Jumped to 3.7% While Consumer Spending Stalled. What Does That Actually Mean for the Stock Market?
Cooling consumer demand and a higher saving rate can ease inflationary pressure and strengthen markets.
Overview
There is a sense that a sticky inflation reading of 3.7% could raise concerns about an economic downturn. But here's the encouraging part many investors tend to miss: cooling consumer demand, coupled with rising personal income, means consumers are simply being more selective with their spending.
That moderation in consumer spending could hold the key to lower inflation in the future, paving the way for a favorable interest-rate environment and, ultimately, for stock valuations.
Details
According to the U.S. Bureau of Economic Analysis (BEA), personal consumption expenditures (PCE) rose 3.7% in July versus the same month a year ago. Excluding food and energy, the price index rose 3.3%.
Source
Originally published at www.fool.com.