It's mighty difficult the closer you get to the consumer to raise prices, and that remains the case. There is a big debate out there as to how long can this continue.
Well, with gasoline well over $3.00 a gallon in most places when this survey was conducted, it is little wonder that consumers were cranky,
We believe that consumer spending is going to bear the brunt of higher energy prices that we have seen leading up to and immediately following Hurricane Katrina as discretionary spending is curtailed.
Combined with the fact that today's retail sales data point to a surge in July personal consumption, this means that the consumer entered Q3 with substantial momentum.
A softening trend for consumer spending is the most likely outcome for most of this year, particularly as housing cools off. However, we do not think that consumer spending growth is going to fall apart anytime soon.
The Fed isn't going to get exited about inflation in the labor market. At this stage they are focusing on core inflation at the consumer level and growth. Certainly, the news lately on the growth side has been quite good.
An aggressive effort by business to pass through higher energy prices will probably largely fail as an increasingly strapped consumer proves resistant.
In general, consumers seem to be taking the view, at least initially, that higher energy costs will not disappear anytime soon and that they are likely to take a toll on the economy as a whole and on labor markets in particular.
As things get colder and heating bills build up, it's going to come right out of discretionary spending, which will impact less affluent consumers more. For the wealthy, it's an inconvenience rather than a lifestyle change.