While the March Producer Price Index (PPI) was cooler than expected, the Consumer Price Index (CPI) came in hotter than expected, raising questions about how it may impact consumers and the broader economy. Mastercard Economics Institute Chief US Economist Michelle Meyer joins The Morning Brief to discuss recent inflation data and give insight into economic trends during sticky inflation.

Meyer reflects on consumer spending: "The stories around consumers loving experiences, I don't think that's gone away. We're keen at the Mastercard Economics Institute to explore that in detail, given the high frequency nature of our insights and our data...Consumers are really looking for those moments in time to spend. When they find it, they have the ability to really participate. I think that's a function of the purchasing power that's still out there.

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This post was written by Nicholas Jacobino

Video Transcript

- The producer price index in March offering investors some relief over inflation fears this morning. Both the monthly and yearly readings coming in below analysts' expectations. But the data comes on the heels of a hotter than expected CPI report. Here with more on sticky inflation and how it impacts Americans, we turn to Michelle Meyer, who is the Mastercard Economics Institute Chief US Economist. Great to see you as always, Michelle.

MICHELLE MEYER: Great to see you, Brad.

- You see hot prints like yesterday come through. I wonder what goes through your mind, and how do you correlate that to the data that you see over at Mastercard, which is, I imagine, just data centers long worth of data here that you have to evaluate.

MICHELLE MEYER: Well, I think the fact that inflation is proving stickier, particularly in some of the services categories, is somewhat indicative of the fact that the real economy is also looking stronger. We saw job growth accelerate throughout Q1. We've seen consumer spending accelerate. As well when we look at our own SpendingPulse data, we are seeing greater spending into March.

So yes, I think there's still a narrative out there around a disinflation, particularly for a lot of goods, particularly reversing the inflation that was driven by the supply side. But when you think about the demand led inflation, there's still some pressure there.

- Michelle, is that across the board? Or what are you seeing from higher income earners versus lower income earners, and maybe the more pressure that lower income earners are under at this point in the cycle, and the fact that inflationary pressures continue to be much higher than many had forecasted at this point.

MICHELLE MEYER: Well look, I mean, always these aggregate numbers are disguising what's happening in terms of the micro data. So there's lots of different narratives in there. But I would say when you look at the labor market, which is probably one of the best ways to understand these different dynamics by sector, by income group, et cetera, you are seeing wage growth pretty consistent across different sectors, across different income cohorts, when you look particularly at the Atlanta Fed measure that has that really nice breakdown.

And job creation has been pretty broad based. Construction, manufacturing, goods sector, is now seeing stronger job growth as well, it's not just the services sector. So to me, of course, there's different dynamics. It's not a uniform economy when it comes to spending, when it comes to inflation, when it comes to growth. But there's nice breadth in terms of what we're seeing in terms of the expansion right now.

- Goods versus services, where are you seeing the highest level of spend continue to remain resilient right now over at Mastercard?

MICHELLE MEYER: Well, I mean, the story around consumers loving experiences, I don't think that's gone away. And we're really, really keen at the Mastercard Economics Institute to explore that in detail, given the high frequency nature of our insights and our data. So we just yesterday published a blog looking at the Masters, which is going on right now, golf tournament to see how the local economy in Augusta is being supported by people going out and spending in restaurants, and hotels.

Small businesses seeing really important lift. International folks coming in. Tourism bringing about this big burst of activity. So it shows you that consumers are really looking for those moments in time to spend, and when they find it, they have the ability to really participate. And I think that's a function of the purchasing power that's still out there on aggregate.

- Yeah. I just got back from Augusta a couple of days ago, Michelle, and they ran me for a couple of pennies for sure. So I can attest to everything that you just said here. I wonder, within the experience economy and where we're also seeing more people tap into online experiences versus going there. Is any moderation that we are seeing in the number of people that are saying, I will travel to go to that event, I will travel to go to that experience. Versus saying if I can experience it via streaming and perhaps just have my fan experience in another way that has more digital and more data that's also intertwined into it that they're making a decision one way or the other.

MICHELLE MEYER: I think it's both. I mean, I think we have become a more digitized economy in many ways. And the pandemic accelerated that in the sense of being able to have these remote interactions. So people do use that, of course, for greater spending power. We have seen, if you look at our SpendingPulse data, the online spending trends continue to outrun what you're seeing in terms of in-store.

But you make a good point, Brad, that the online activity is not just for goods, it also is for part of these experiences. Nonetheless, I think when it comes to travel trends, you are clearly still seeing a lot of people in action going, trying to get to those experiences that matter most.