Main Topic: U.S. inflation and the Federal Reserve's efforts to control it.
Key Points:
1. U.S. inflation has declined for 12 straight months, but consumer prices increased 3% year-on-year in June.
2. The Federal Reserve aims to reduce inflation to about 2% and plans to raise its key federal funds rate to over 5%.
3. The Fed is concerned about high inflation due to a strong labor market, rising wages, and increased consumer spending, and aims to slow the job market to control inflation.
### Summary
Former Toys "R" Us CEO Gerald Storch warned that the economy is likely to face a difficult holiday season due to persistent inflation. Other economic stresses such as rising interest rates, credit card debt, and student loans are also contributing to consumer difficulties.
### Facts
- Inflation remains sticky despite the Inflation Reduction Act that was passed a year ago.
- Sales of physical products have been declining for 11 consecutive months when adjusted for inflation.
- The July consumer price index (CPI) rose 0.2%, with prices climbing 3.2% from the same time last year.
- Pulte Capital CEO Bill Pulte suggests that the economy is in a period of stagflation with low growth and high inflation.
- Shelter costs, accounting for 40% of the core inflation increase, rose 0.4% for the month and are up 7.7% over the past year.
- Americans are spending $709 more per month on everyday goods and services compared to two years ago.
- Consumers are shifting towards value retailers in response to inflation.
- President Biden acknowledges that the Inflation Reduction Act was not solely aimed at reducing inflation but rather focused on generating economic growth.
US inflation remains above 3% as the cost of goods and services rose by 0.2% in July, prompting speculation that the Federal Reserve may freeze interest rates to manage inflation without causing a recession.
US consumer spending increased by the most in six months in July, driven by strong demand for goods and services, but slowing inflation rates suggest that the Federal Reserve will keep interest rates unchanged next month.
Consumer spending in the US jumped 0.8% in July, the strongest monthly gain since January, driven by purchases of restaurants, live shows, toys, games, and recreational equipment; however, underlying data suggests that this spending may be on borrowed time.
US job and wage growth slowed in August, but the Federal Reserve's efforts to control inflation and prevent a recession seem to be working as planned. The unemployment rate increased to 3.8 percent, but this is viewed as a positive sign by the Fed.
The US economy grew modestly in July and August, with signs of consumers relying more on borrowing to support spending after depleting their savings, while inflation slowed due to decreasing price pressures in the goods sector, according to the Federal Reserve's Beige Book report.
Inflation has decreased significantly in recent months, but the role of the Federal Reserve in this decline is questionable as there is little evidence to suggest that higher interest rates led to lower prices and curtailed demand or employment. Other factors such as falling energy prices and the healing of disrupted supply chains appear to have had a larger impact on slowing inflation.
Americans' overall views on inflation remained unchanged in August, despite predictions of rising prices for rent, homes, and food, and a downgrade in their personal financial situations, according to the New York Fed's Consumer Sentiment Survey.
The Consumer Price Index is expected to show an increase in inflation in August, with headline inflation rising to 3.6% and core inflation easing to 4.4%, but the market is accustomed to this trend and the Federal Reserve is unlikely to change its rates at the upcoming meeting.
U.S. consumer prices are expected to have increased the most in 14 months in August due to rising gasoline costs, while underlying inflation is forecasted to remain moderate, potentially prompting the Federal Reserve to keep interest rates steady.
Consumer spending in the US is showing signs of cooling, with retail sales expected to slow down in August, indicating that the resilience of the consumer may be waning due to increased borrowing, depleted savings, and the impact of inflation.
Inflation is expected to fall below the Federal Reserve's 2% target by late next year, despite a recent rise in consumer prices driven by increased energy costs.
Despite claims by the Biden administration and corporate media that inflation is decreasing, the latest consumer price index from the Bureau of Labor Statistics shows that Americans paid 3.7 percent more for basic consumer items in August compared to the previous year.
Cryptocurrency prices remained stable as inflation in the U.S. surpassed economists' expectations, with Bitcoin trading at around $26,100 and Ethereum experiencing a slight dip of 0.5%. The Federal Reserve will consider this report, among other factors, for its upcoming interest rate announcement on September 20. While inflation has decreased since June, it still exceeds the Fed's target of 2% annually. Core inflation, excluding volatile food and energy costs, decreased to 4.3% in August compared to July's 4.7%.
Inflation in the US accelerated for the second consecutive month in August due to rising costs of rent and gasoline, with the consumer price index rising 0.6% from the previous month and 3.7% from the same time last year.
Wholesale inflation in the US rose more than expected in August, with the producer price index increasing by 0.7%, the largest monthly gain since June 2022, counteracting recent data that suggested price increases had been slowing down.
Consumer sentiment in the US fell for the second month in a row in September, reflecting concerns about the economy, even though Americans believe that inflation will continue to slow.
Inflation in the UK fell to 6.7% in August, the lowest level in a year-and-a-half, driven by slower food price increases and a drop in hotel and air fare costs, although fuel prices rose; economists had expected the figure to increase due to rising fuel prices.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
Australian consumer inflation grew as expected in August, driven by surging energy and housing costs, raising speculation that the Reserve Bank may need to further increase interest rates.
Consumer spending in the US grew at a weaker pace than previously estimated in the second quarter, indicating that Americans have been cutting back on their spending more than expected.
The Federal Reserve's preferred measure of inflation decreased in August, indicating that efforts to combat inflation are progressing, although there are still price growth pressures that could lead to further interest rate hikes by the central bank.
The Federal Reserve's preferred inflation indicator, the personal consumption expenditures price index excluding food and energy, rose less than expected in August, suggesting progress in the central bank's fight against higher prices.
The Federal Reserve's preferred inflation metric, the Personal Consumption Expenditures (PCE) Index, showed slow growth in August, with the core PCE rising by only 0.1% on a monthly basis, suggesting that inflation is cooling and falling in line with the Fed's target.
Consumer spending in August saw a slight increase of 0.4%, which is less than the previous month's 0.9% rise, according to Commerce Department data.
The U.S. government's upcoming inflation report is expected to show a cooling off of inflation, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, and core inflation expected to be up 4.1% from September last year, indicating slower price increases in September than in August.
The upcoming monthly inflation report is expected to show that inflation in the US is cooling off, with overall prices for consumers rising by 0.2% compared to August and 3.6% compared to a year ago, indicating slower price increases in September than in August. However, if the report reveals that inflation remained higher than expected, especially in core areas, it may prompt the Federal Reserve to raise interest rates again, further slowing the economy.
U.S. consumer prices rose in September due to surging rental costs, but underlying inflation pressures remained moderate, suggesting that the Federal Reserve is unlikely to raise interest rates next month.
Consumer prices in the US grew at the same pace in September as in August, indicating that progress in controlling inflation may be stalling, prompting Federal Reserve officials to remain cautious with interest rate decisions.
The majority of American consumers are cutting back on both essential and non-essential items in response to inflation, with 92% reducing their spending, particularly on clothing, restaurants and bars, and entertainment outings; however, despite this, household spending in the US has actually increased by 5.5% compared to last year.
Persistently high inflation in the US has led to a 7% decrease in consumer sentiment in October, with concerns over inflation impacting personal finances and expectations for future inflation rising to 3.8%.
US inflation rose 3.7% in September, surpassing economists' expectations and remaining well above the Federal Reserve's target of 2%.
The resilient US consumer and strong job market are boosting consumer spending, which could lead to more Fed rate hikes and upside risks to inflation entering the fourth quarter of 2023.
The strong performance of the US consumer, with retail sales rising 0.7% in September, could lead to more Federal Reserve rate hikes and upside risks to inflation entering the fourth quarter of 2023.
The U.S. economy saw improvement at the start of the fourth quarter, with the service and manufacturing sectors experiencing growth, slowed inflation, and fresh hopes that interest rates have peaked, according to S&P surveys.
The rate of U.S. inflation is slowing, but it's not slowing as quickly as earlier this year, with the Federal Reserve expecting a 0.3% increase in the core PCE price gauge in September, indicating that progress towards the Fed's 2% inflation target will likely happen at a much slower rate in the months ahead.
Against all odds, the US economy grew at an annualized rate of almost 5% last quarter, more than double the previous quarter, largely due to the power of low mortgage and loan rates, strong consumer balance sheets, increased productivity, and low employee turnover; however, there are concerns that the Federal Reserve hasn't done enough to combat inflation and that future revisions may change the story.
U.S. consumer spending increased by 0.7% in September, driven by purchases of motor vehicles and travel, and accompanied by elevated inflation readings; however, spending is expected to cool off in early 2024 due to the depletion of excess pandemic savings.
US underlying inflation picked up along with consumer spending in the third quarter, indicating a possible interest rate hike, while the UK faced declining employment and the eurozone showed signs of recession.
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