Pinch at the Pump: Energy and Consumer Spending
Inflation's a bitch.Soaring energy costs pushed U.S. producer prices up by twice as much as expected in July, warning of future inflation.
"Business pricing power continues to rise as the economy grows above trend and there are upside risks going forward..." said Morgan Stanley economist Ted Wiesman.
As Maxim Group's Barry Ritholtz underscores, the resiliency of consumer spending in the face of high-energy prices has surprised many observers.
The logic goes as such: the the economy's resiliency can be proved by the fact that consumers are still spending amidst soaring energy prices.
But the truth stares at us like a deer in headlights: Budget-minded shoppers simply cannot ignore $3 a gallon gasoline.
If you're from California, the $4 mark doesn't seem so unfathomable now, does it?
Our only hope lies in the Fed: Fed tightening will likely effectuate a real estate slow down, which will indirectly create less demand for energy.
Only then will we see that regression to the mean pundits are so effervescently yapping about.
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