Inflation indicators, closely tracked by the Federal Reserve, surged 6.3% year-on-year in May. April level..
Thursday’s report from the Commerce Department provided painfully up-to-date evidence. High inflation It puts pressure on American families and causes special harm to low-income families and people of color.
The report also showed that consumer spending was sluggish by 0.2% from April to May. In the face of high inflation, consumer spending is beginning to weaken. However, it is still driving inflation itself, especially as demand for services ranging from airline tickets and hotel rooms to restaurant meals to new and used cars increases.
Jennifer Lee, senior economist at BMO Capital Markets, said in a research note: After adjusting for her inflation, she said her personal consumption actually fell by 0.4% from April to May.
On a monthly basis, Thursday’s report showed that prices rose 0.6% from April to May, up from 0.2% from March to April.
Chronically high inflation Economy As the midterm elections approach, there are political dangers to President Biden and the Democratic Party.According to the report, 79% of adults in the United States say the economy is poor. New Survey from Associated Press-NORC Public Relations Center.. Inflation is above the healthy 3.6% unemployment rate, especially as the focus of struggling Americans. High prices for gasoline and food..
In response, the Fed has embarked on a series of aggressive rate hikes. This is intended to slow growth by increasing borrowing, but it also carries the risk of causing a recession. Two weeks ago, the Fed Increased key rate by 3/4 points — The biggest rate hike in nearly 30 years — and suggested that there will be even more significant rate hikes in the future.
The Federal Reserve tends to monitor Thursday’s inflation gauge, called the Consumer Expenditure Price Index, more closely than the government’s well-known government. Consumer price index.. Although the components of the two indicators are different (CPI tends to weigh more on gasoline and housing costs and show higher inflation), the two gauges show the same basic story.
The report also shows that consumer income rose 0.5% from April to May, slightly above inflation. In addition, the savings rate rose slightly to 5.4% last month, well below its April 2020 peak of nearly 34%. At that time, millions of Americans were depositing government bailout checks in banks. Precautionary measures against COVID-19.
Soaring prices are the result of an unexpectedly rapid recovery of the economy from the 2020 pandemic recession. Boosted by government stimulus, record low borrowing rates, and savings accumulated while staying home during a pandemic, consumers continued to spend on seizing businesses. Overwhelming factories, ports and cargo yards. The resulting shortage of goods and labor has caused prices to skyrocket.
The Fed took time to recognize the seriousness of the inflation threat and rejected it primarily as a temporary result of supply chain bottlenecks. However, soaring prices have proven uncontrollable, and central banks are now catching up with significant rate hikes, which can disrupt the economy.
High inflation is making consumers increasingly uneasy about the economy. Prices rose faster than profits, reducing purchasing power. The consumer confidence scale reached its lowest point in 16 months, and American outlook was bleaked by inflationary concerns, especially gas and food prices.
The Fed’s main inflation gauge remains high at 6.3%
Source link The Fed’s main inflation gauge remains high at 6.3%