Overview of Recent Economic Developments
The United States’ inflation rate increased slightly in August, reaching 2.7% annually—a tenth of a percentage point higher than July’s rate, according to the preferred index of the Federal Reserve (Fed), which oversees monetary policy.
Key Inflation Figures
- PCE Index: The Personal Consumption Expenditure (PCE) price index, favored by the Fed for measuring inflation, rose 0.1% in August compared to July (2.6%) and is moving further away from the Fed’s 2.0% target.
- Monthly Price Increase: The monthly price increase rose from 0.2% in July to 0.3% in August.
- Underlying Inflation: Core inflation, excluding volatile energy and food prices, remained stable at 2.9% annually, according to the U.S. Department of Commerce.
These figures align with market predictions, as per a survey of analysts published by MarketWatch.
Experts’ Outlook on Inflation
Most experts anticipate that U.S. prices will continue to rise due to the impact of tariffs imposed by President Donald Trump. This rising inflation, coupled with the current weakness of the U.S. dollar, diminishes the purchasing power of American consumers.
Mixed Economic Signals
- Strong Consumer Spending: Despite some negative factors, consumer spending remains robust. Michael Pearce of Oxford Economics noted that “consumer spending is being driven by wealthier households.”
- Business Investments: Companies have slowed their investments (except in artificial intelligence), economic growth has decelerated, and unemployment has slightly increased. However, consumer spending—a key driver of the U.S. economy—remains strong for a segment of the population.
- Capital Income: Pearce attributes the lesser-than-expected negative impact on real income to “increased dividends and other capital income, typically enjoyed by wealthier households.”
Heather Long, an economist at Navy Federal Credit Union, emphasizes the need to monitor how the middle class fares amidst rising prices.
Current Economic Context
While inflation and currency concerns persist, there are positive indicators in the U.S. economy:
- Stock Market Performance: Wall Street is currently hitting historical highs.
- Real Estate Market: Home prices are at their highest levels.
Despite these positive signs, economists like Heather Long stress the importance of monitoring the middle class’s situation as they already face high prices.
