U.S. inflation hit 8.5%: what’s happening with consumer spending?

The U.S. inflation jumped 8.5% in March – the highest since 1981. Still, consumer spending remains strong as ever, says Mastercard’s Michelle Meyer.

Highlights from Meyer’s interview on CNBC’s ‘Closing Bell’

According to the chief U.S. economist at the Mastercard Economics Institute, the consumer continues to spend not only on necessities but also on experiences. On CNBC’s “Closing Bell”, Meyer said:

Consumer is still out spending; more on necessities that likely reflects inflation impulse spending at the gas station or on food, but also very much on experiences. So, air travel, lodging, restaurants, and even still durable goods.

She confirmed that a trade-off between necessities and discretionary spending hasn’t been apparent so far, as per the data from Mastercard SpendingPulse.

What does the future look like for consumer spending?

Meyer attributes continued spending to savings, a strong labour market, and low debt ratios and unemployment rate. The future, she added, will depend on the persistence of inflation.

How long do we see the commodity prices at these high levels. How long do we see this broadness of inflation. Because consumers can’t withstand this indefinitely of course. At some point, you do start to see the stress kick in.

Meyer does see a moderation in economic growth but is “iffy” on the forecast of recession next year that Deutsche Bank signalled last week.

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