It may be evidence inflation is meaningfully stretching budgets.

According to economic forecaster Lakshman Achuthan, Wall Street is ignoring a striking consumer spending slowdown that will translate into an underwhelming holiday season.

“There’s still this narrative that the rebound is there,” the Economic Cycle Research Institute co-founder told CNBC’s “Trading Nation” on Wednesday. “The hope had been people would shift from goods to services, and that would keep reaccelerating… That hasn’t happened.”

Achuthan highlights the downturn in a chart reflecting real consumer spending data from the U.S. Bureau of Economic Analysis.

“It shows consumer spending for goods and services. And, you could see that spike in the spring of ’21, and that’s right following all those stimulus checks,” he said. “Ever since then, things have really been slowing quite sharply. You could see goods growth coming down. Services growth also coming down.”

Achuthan contends rising prices for housing, energy and food are leaving consumers with less money to spend on discretionary purchase.

“I don’t think we could just pretend that that’s not going to have some sort of impact,” he said.

U.S. consumer prices jumped to the highest level in more than 30 years in October, according to the Labor Department.

Achuthan is no stranger to inflation warnings.

On “Trading Nation” in October 2020, he warned inflation was making a “pervasive and persistent” comeback. Now, he’s not ruling out stagflation, which refers to pressures that push prices higher during periods of slowing growth.

“I don’t know about decades long stagflation. But I think we could have a snapshot here of what I would call cyclical stagflation,” Achuthan said. “You could have some cyclical slowing while inflation is rising. That’s a snapshot. It’s like a polaroid shot of stagflation for a little bit. But we have to see where the inflation cycle goes. That remains to be seen.”

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