Consumers simply won’t have enough cash for consumer discretionaries.
The August U.S. inflation numbers that printed Wednesday should concern consumers as headline inflation continues to inch upward, printing at 3.7 percent, exceeding expectations, and defying the efforts of the Federal Reserve to contain it. Core inflation, which excludes the cost of food and fuel, dropped slightly but still printed at 4.3 percent. Since inflation compounds, and is cumulative, Americans are now paying about 17 percent more than they did when the Biden Administration first pronounced the most recent bout of inflation to be “transitory.”
We have long said that the principal cause of the current inflation is the enormous size of the Fed’s balance sheet, exacerbated by federal spending. As we look at a now $7 trillion federal budget and record $2 trillion dollar deficits as far as the eye can see, it’s clear the Fed balance sheet will not be shrinking sufficiently or rapidly enough to arrest the inflation we are suffering.
But it is likely to get worse.
Saudi Arabia and other OPEC+ countries (i.e., OPEC members and their allies) are determined to boost the price of oil and are restricting production. Saudi Arabia has cut its production by one million