It's All in the Hands of Inflation Now
Inflation continues to take a toll, but consumers haven't flinched just yet.
The big news this week was Thursday's GDP report. While the headline growth rate of 1.8% was in line with expectations (and below the fourth quarter's 3.1%), there was a lot of positive news imbedded in the report.
The slowing was due largely due to shifts in government defense spending and weather-related construction spending. Meanwhile, consumer spending fell far less than expected, and growth in business spending on equipment and software actually accelerated in the first quarter.
In other words, consumers' haven't flinched just yet. However, inflation continued to take its toll on both businesses' and consumers' incomes. The devastating effects of inflation showed up in the earnings reports of many consumer products companies, including Procter & Gamble (PG) and Clorox (CLX), who both reported lower-than-expected margins due to rising commodity inputs.
Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.