Inflation Climbs to Nearly Three-Year High as Consumer Sentiment Weakens
By Christopher Cicchiello | Quincy News Correspondent
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Washington (Quincy News) — Core inflation rose 0.2% in April, a Thursday report from the Commerce Department’s Bureau of Economic Analysis shows. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, increased a seasonally adjusted 0.4% for the month, bringing annual inflation to 3.8%, the highest level in nearly three years.
This latest data comes as Americans’ confidence in the economy continues to weaken. The Conference Board Consumer Confidence Index slipped 0.7 points in May to 93.1, as the share of respondents describing business conditions as “good” dropped to 18.5%, down from 22.3% in April.
The Conference Board’s Chief Economist Dana Peterson attributed this decline in sentiment to growing concerns over the economic impact of the war in the Middle East. “Consumer confidence edged downward in May as the inflationary impacts of the war in the Middle East intensified,” Peterson said. President Donald Trump said Friday on social media that he plans to issue a “final determination” on the conflict.
In Thursday’s White House press briefing, Treasury Secretary Scott Bessent dismissed concerns about the findings from the latest PCE report. “One month does not a trend make,” Bessent said, adding that he believes “prices could come down very quickly” at the conclusion of the war.
“This constant whipsaw of ‘there’s a deal, there’s not a deal, there’s a deal, there’s not a deal’ weighs on people,” Professor David Mitchell, the Director of the Bureau of Economic Research at Missouri State University, told Quincy News. “Everybody knows why gas prices are high … For lack of a better word, people need some stability in their lives.”
Mitchell noted one statistic that illustrates just how people are “falling further and further behind” came from The Wall Street Journal: 90-day delinquencies on credit cards are at the highest levels since the 2008 financial crisis.
“It’s a source of consternation,” Mitchell said. “It makes you say, ‘What’s going on here? What can I do? I’m playing by the rules, I’ve done everything I can and I’m still falling behind.”’
Results from The Conference Board survey align with the University of Michigan’s Surveys of Consumers, as sentiment fell for the third straight month. Across party lines, confidence among independents and Republicans dipped to the lowest levels since Trump began his second term. Chief among respondents’ concerns was an “eroding of personal finances,” the report reads. Separately, Commerce Department data showed personal income decreased by $0.1 billion in April, while disposable personal income fell by $19.9 billion.
This is the economic landscape facing newly sworn-in Federal Reserve Chair Kevin Warsh. Economists and policymakers will be watching June’s Federal Open Market Committee meeting for signals on his approach to interest rates, after Trump suggested Warsh will be more amenable to rate cuts – a position that could create divisions within the Fed.
“The first thing I’d be looking for is that first meeting interaction with him (Warsh) and all the other fed governors,” Mitchell said. “It’s one thing to say here’s what I want to do. It’s another thing when you’re in the sausage factory trying to make the sausages. It’ll be interesting to see how he deals with these dissenting opinions.”
Mitchell is referring to divided opinions within the Fed on what to do about interest rates. Federal Reserve Governor Lisa Cook said Wednesday that while she believes the central bank should keep short-term interest rates firm, she is prepared to raise rates if necessary.
The next PCE report is scheduled for release June 25.
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