"Nothing Left After Rent and Gas"...Shocking Reality of Americans Relying on Debt [Weekend Money]

Retail Sales Surprised in August
But Real Purchasing Power Continues to Decline

In the United States, the burden of living costs, particularly essential expenditures, has been rising, leading to projections that consumer spending will slow down for the time being.

KB Securities evaluated that wage growth in the United States has moderated, while the burden of living expenses has increased.

In August, U.S. retail sales rose 1.2% compared to the previous month. Core retail sales, which exclude volatile items such as gasoline, automobiles, and building materials, increased by 1.4% over the same period. The beginning of the new school term drove up spending on electronics and clothing, resulting in a surprise retail performance; however, concerns over inflation have grown.

As the burden of expenditures that cannot be easily reduced, such as energy prices and rental costs, has grown, the real purchasing power of wages for other sectors has weakened. It is observed that when oil prices rise, the impact on consumption is felt within 0 to 1 month, while when prices fall, the effect appears after 2 to 3 months. This means that consumer sentiment deteriorates sharply when oil prices go up. Additionally, with mortgage rates rising recently, the rental growth rate has reached 0.34% month-on-month in both July and August, indicating a larger increase in rents.

As a result, consumer credit growth rates have been rising. It is estimated that households experiencing diminished purchasing power are increasingly relying on credit card revolving balances and similar mechanisms to fund their spending. In this environment, the U.S. Federal Reserve’s interest rate hikes have further increased interest burdens.

Kwon Heejin, economist at KB Securities, stated, “For the time being, the momentum for expanded household consumption across the United States will be limited, and polarization of spending between different income groups will intensify.”

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