

Inflation, labor and savings provide upside potential
Unlike last September, when core inflation was 6.7% on a year-over-year basis, this year core inflation has fallen to 2.8%. Further, inflation on two important holiday shopping categories, apparel and recreational goods, has fallen to 2.3% and 0.3% on a year-over-year basis compared with 5.5% and 4.0%, respectively last year, according to the U.S. Bureau of Labor Statistics. Based on RSM’s latest calculations, consumers have between $400 billion and $1.3 trillion of excess savings, the majority of which resides with upper income consumers, who account for more than 60% of monthly spending and should provide ample ammunition for shopping in the holiday season and into next year. In addition, many consumers continue to have the benefit of a strong labor and wage market based on the 3.9% unemployment rate in October and average hourly earnings growth of 4.1% in the same period, according to the BLS. This labor market provides many consumers, especially those unable to use excess savings, confidence to spend through the remainder of the year. While survey data indicates consumers are broadly pessimistic about the state of the economy, that has not stopped spending since the start of the pandemic.Don’t expect discounting to drive all spending activity

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