Question by Paul B: Is Consumer spending really rising or is it just going up because everything is now being priced higher as a?
result of the increase in gas prices?

I know the grocery stores prices are going up every week nowadays!

Best answer:

Answer by Alex K
Not sure what you mean exactly by consumer spending (after reading the rest of your question).

There are two things you can look at here. You can look at how much people are buying, and/or you can look at how much prices are going up. Most people usually look at how much prices are going up…

The way we measure the rise in prices (aka inflation), is through something called the Consumer Price Index (CPI). This is based on a “basket” of goods that each month the government goes and looks at how much those things cost and report how that has changed since last month. This includes gas and food (among many other common purchases). But whenever this number is reported, both the number with food and energy and the number without food and energy are reported. This is because gas and food are the two things we care the least about the price going up (called inelastic goods — note: i know we care, but it usually doesn’t actually change how much we buy, especially compared to other things). So although gas and food have been going up, we try to look at the changes in prices without those things too to really cage how prices are rising.

Now there are also direct numbers about how much money people are spending, and it is all broken down into all different sectors of the economy. I don’t follow the direct reports of these numbers, but I have to assume they have been normalized (converted so that inflation is taken out of the mix). I know all reporters are not economists, but we all know the numbers are useless if you don’t take out inflation, so I assume they do. That may not be the case with the direct number value (as its actually often easier to just see that number in today’s dollars — at least for me), but for the percent change, it is almost always reported after taking out inflation. Otherwise, it is just a useless number.

Hope this helps… Add more details if you have more questions, I will check back!

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