Americans are buying tons of stuff.
The following chart comes to us from Rick Rieder at BlackRock, who presented a version of it during a media briefing attended by Business Insider on Friday.
Rieder looks at the divergence between personal consumption expenditures (PCE) by volume and by price.
The amount of stuff consumers are buying by volume looks robust, but when judging this reading by price — looking how much more money consumers are spending year-on-year — consumption looks soft.
In Rieder’s view, this chart shows that while some of the more closely-watched data paint a picture a still-sluggish US consumer, things are going pretty well in the US economy, and in particular for US consumers.
The reason for this is two-fold.
First, energy prices have fallen sharply, weighing on overall consumer prices.
But the second, and for Rieder more important reason, is that technology and the overall arc of how things like the iPhone are weighing on inflation and prices, which means the economy can still grow without the same level of inflation those growth rates have seen in the past.
And so while the Federal Reserve elected to keep interest rates pegged at 0% on Thursday as inflation pressure remain muted, this way of looking at consumer spending indicates that traditional inflation dynamics may have changed so much that we need a new way of looking at the economy.
This chart also implies that while many have wondered whether Americans are really going to benefit from lower oil prices, the increase in PCE volume implies that yes, in fact Americans have been buying more stuff.
And given that consumer spending accounts for about two-thirds of the economy, this is good news.
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