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Tag: inflation impact

  • Wealthier Americans Drive Retail Spending, Powering U.S. Economic Growth Amid Inflation

    Wealthier Americans Drive Retail Spending, Powering U.S. Economic Growth Amid Inflation

    Despite persistent inflation and rising borrowing costs, consumer spending in the U.S. has remained surprisingly strong, with wealthier Americans playing a key role in powering retail sales and driving economic growth. According to recent Federal Reserve data, the upper-income segment has been instrumental in sustaining spending, even as lower-income households face financial strain.

    High-Income Consumers Fuel Economic Expansion

    Affluent Americans, buoyed by rising home equity, stock market gains, and strong income growth, have continued to spend freely. This trend marks a shift from pre-pandemic spending patterns, where consumption grew more evenly across all income levels. The change is helping the U.S. economy maintain steady momentum, despite tighter monetary policies aimed at curbing inflation.

    On Thursday, the Commerce Department reported a 0.4% increase in U.S. retail sales from August to September, reflecting consumer confidence. Notably, restaurant sales jumped by 1%, indicating that many Americans feel comfortable spending on dining out—a sign of economic resilience.

    The Federal Reserve Bank of Atlanta now estimates that the U.S. economy grew at a robust 3.4% annual rate in the third quarter, bolstered by higher consumer spending.

    Wealth Inequality Creates Spending Gaps

    While higher-income households benefit from substantial gains, lower-income Americans have struggled with elevated costs for essentials like rent and groceries, leaving less room for discretionary purchases. Inflation-adjusted spending for households earning under $60,000 has grown just 7.9% since 2018, lagging far behind the 17% growth seen among those earning more than $100,000.

    Fed economists note that from 2021 to 2023, spending among lower-income groups declined, reflecting how inflation has disproportionately affected them. However, as inflation-adjusted wages begin to recover, there are signs that spending within this group is starting to rebound.

    Housing and Stock Market Boost Affluent Consumers

    The wealth accumulation among high-income Americans has further fueled spending. Since the first quarter of 2020, home equity for the wealthiest 10% of households has surged by 70%, reaching $17.6 trillion. Additionally, their stock and mutual fund wealth has soared by 86% to nearly $37 trillion.

    The S&P 500 index is up 22.5% this year, contributing to these gains, with approximately 80% of the stock market’s value held by the wealthiest 10% of households. This increased wealth has reduced the need for affluent Americans to save from their paychecks, enabling them to ramp up discretionary spending.

    Strong Consumer Spending Defies Fed’s Tight Monetary Policy

    Despite the Federal Reserve maintaining high interest rates, inflation-adjusted consumer spending rose 3% in 2022 and 2.5% in 2023. The April-June quarter alone saw spending increase by an annualized rate of 2.8%.

    Michael Pearce, deputy chief U.S. economist at Oxford Economics, commented on the trend, saying, “It speaks to the ongoing strength of those Americans, which is still carrying overall spending.”

    Even with higher borrowing costs for mortgages, auto loans, and credit cards, robust spending has kept the economy growing, easing fears of an imminent downturn.

    Economic Growth Heading into 2024

    As inflation pressures ease and lower-income groups gradually regain financial stability, consumer spending is expected to remain a key driver of U.S. economic growth heading into 2024. However, the disparities in spending across income levels will likely continue to shape economic policy discussions, especially as the U.S. presidential race heats up.

    Source : Swifteradio.com

  • “Retailers Demand Rachel Reeves Deliver on Business Rates Relief Amid £2.7bn Tax Threat”

    Retailers Urge Chancellor Rachel Reeves to Deliver on Promise to Ease Business Rates Burden

    Retailers are calling on UK Chancellor Rachel Reeves to honor her commitment to reduce the strain of business rates on high street businesses, as new analysis warns of a looming £2.7 billion tax hike that could disproportionately impact small retail, leisure, and hospitality firms.

    According to a report by real-estate intelligence firm Altus Group, more than 252,000 businesses—including shops, pubs, cafes, restaurants, and bowling alleys—are expected to face steep tax increases from April 2025. The increase will follow the expiration of a 75% business rate relief capped at £110,000.

    Rising Costs Threaten Recovery of High Streets

    Altus Group’s analysis reveals that all property types will collectively face an additional £545 million tax burden next year, with £250 million of that falling directly on retail, leisure, and hospitality sectors. This comes as inflation remains a key factor in driving the tax increase.

    Andrew Goodacre, CEO of the British Independent Retailers Association (Bira), warned that ending the relief could harm high streets that are still recovering from the pandemic. “The chancellor has the power to extend the retail, hospitality, and leisure relief, which is vital if high streets are to revitalise and thrive,” Goodacre stated, urging the government to maintain this critical support.

    Alex Probyn, President of Property Tax at Altus Group, echoed this sentiment, emphasizing the importance of immediate action: “Despite the £22 billion fiscal gap, the government must avoid a cliff-edge scenario for these sectors at the upcoming budget while fulfilling Labour’s promise to ease the burden on high streets.”

    Longstanding Calls for Reform Intensify

    The retail sector has long criticised business rates as outdated and unfair. Efforts to reform the system began under former Chancellor George Osborne in 2015, who introduced relief for smaller businesses. However, with the rise of e-commerce, many retailers argue that more comprehensive reforms are necessary to compete with online rivals.

    The impact of inflation has further compounded the problem, with rising rates adding to financial pressures while footfall on high streets remains below pre-pandemic levels. The inflation figure for September 2024, which will influence next year’s rate increases, is expected to be around 2%, down from 6.7% the previous year. Official data is scheduled for release on Wednesday.

    In its pre-election manifesto, Labour pledged to replace the current business rates system with a fairer framework, arguing that the existing arrangement discourages investment and creates uncertainty for high street businesses. However, the party has yet to unveil specific details about the new system.

    Retail Giants Join the Chorus of Concern

    Last week, more than 70 major retailers—including Tesco, Marks & Spencer, and Ikea—wrote to Reeves, demanding a 20% reduction in business rates. The letter, coordinated by the British Retail Consortium (BRC), warned that without meaningful reform, many stores could face closure.

    The BRC proposed a “retail rates corrector” mechanism, urging the government to address the disparity between high street businesses and online competitors. Business rates are levied by local councils based on the rental value of properties, including warehouses, offices, and retail spaces.

    Government Response

    A government spokesperson reiterated Labour’s commitment to supporting businesses: “We are focused on making the business rates system fairer, capping corporation tax at 25%, and developing a business tax roadmap to provide greater certainty for future investments.”

    As pressure mounts ahead of the next budget, retailers await concrete action from Reeves and the Labour government to mitigate the financial challenges facing the high street. Whether the promised reforms will arrive in time remains a pressing question for business owners across the country.

    Source : Swifteradio.com