3 things making the American consumer miserable
By Anneken Tappe, CNN Business
The American consumer is dealing with a lot of problems: higher prices, shortages and the Delta variant.
America’s economy can’t fully recover without help from its consumers, who are the backbone of the nation’s economic strength. But rising inflation, goods shortages, supply chain issues and rising coronavirus cases have left consumers in a difficult spot.
Consumer spending contributes some two-thirds of America’s gross domestic product, the broadest measure of economic activity. But consumer spending has taken a hit in some parts of the country as the Delta variant spreads.
The Federal Reserve said in a report last week that economic growth “downshifted slightly to a moderate pace” over the summer as worries over the coronavirus caused consumers to dine out and travel less.
The central bank’s Beige Book report, which compiles anecdotes from businesses, found that retailers in New York have grown less optimistic about their prospects for the rest of 2021. Car dealers say there’s “no end in sight” to the chip shortage that has slashed their inventories.
In Atlanta, restaurants and retailers had trouble meeting demand because of persistent labor shortages. In Chicago, consumer spending decreased slightly but remained at a high level even as leisure and hospitality companies suffered.
Inflation climbed to a 13-year high over the summer, before moderating in July. But price hikes have hit everything from lumber to used cars, and economists are worried that some consumers suffering from sticker shock may choose to skip purchases. Businesses are struggling with supply chain issues and long lead times, which are pushing up the price of some products even further.
The jobs recovery continued early in the summer, with some 2.6 million jobs added back to the economy between May and July. Economic activity picked up as well, as people traveled again and the reopening continued. But then, worries about the Delta variant took hold and optimism waned. Retail sales contracted and consumer sentiment plummeted; the August jobs report was far weaker than expected.
Now schools are reopening and parents are bracing for the possibility that their children may be exposed to the virus in class. Meanwhile, many companies are delaying their return to the office because of Delta. None of that is helping consumer sentiment.
This week’s economic data, including retail sales and inflation, will provide a better sense of how the economy fared in August and how badly the Delta variant has hurt the recovery. The economic comeback might continue at a slower pace for the rest of the year.
Is there a silver lining?
“Going into this summer, the biggest threat to the US economy and financial markets was that the recovery would be so rapid and so strong as to cause the economy to overheat. The speed bumps we have encountered this summer have significantly reduced this risk,” David Kelly, chief global strategist at JPMorgan Funds, wrote in a recent note to clients.
India’s got the next big thing in tech, and it could be worth $1 trillion
More than two decades ago, India began its transformation into a global IT powerhouse, ushering in an era of wealth and job creation never before seen in the country.
Now, Asia’s third largest economy is ready for the next big frontier in tech: Coming up with a new generation of software companies like Zoom or Slack.
The Covid-19 pandemic has forced business around the world to make huge investments in digital infrastructure, furthering the influence of companies providing software-as-a-service, or SaaS, my CNN Business colleague Diksha Madhok reports from New Delhi.
Businesses spent an extra $15 billion per week last year on tech as they scrambled to create safe remote working environments, according to a KPMG survey.
SaaS companies provide web-based applications that take care of everything from how secure the software is to how well it performs. Some of the world’s most well-known SaaS companies include Zoom, SAP Concur and Salesforce, the American behemoth that owns workplace messaging app Slack.
India’s software-as-a-service industry could be worth $1 trillion in value by 2030 and create nearly half a million new jobs, according to a recent report compiled by consulting firm McKinsey & Co. and SaaSBoomi, a community of industry leaders.
There are nearly a thousand such companies in India, of which 10 are unicorns, or startups worth at least $1 billion, the report said.
“This can be as big an opportunity as the IT services industry was in the 90s,” said Girish Mathrubootham, CEO of Freshworks, India’s best-known SaaS company.
Up next
Monday: OPEC monthly report; Oracle earnings
Tuesday: US CPI; EU industrial production
Wednesday: Energy Information Agency data on US crude inventories
Thursday: US retail sales and unemployment claims
Friday: Consumer sentiment data from the University of Michigan; EU inflation
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