This February, the Personal Consumption Expenditures (PCE) Price Index increased 0.3% for the month and 2.8% year. This exceeded the Federal Reserve's 2% objective, telling us that U.S. inflation remained high this month. After a drop in January, consumer spending grew by 0.4%, but the real gain was only 0.1% after accounting for inflation. Purchases of durable items accounted for a significant amount of the spending growth, potentially in anticipation of Trump's anticipated tariffs, which could raise costs even more.
The current level of inflation, along with anticipated tariffs, has caused consumer sentiment to decline. Inflation forecasts are now at 5%, which is their highest level in years. According to these patterns, people are becoming more and more cautious about rising prices even when spending is staying the same, and policymakers may need to take further steps to reduce inflation without slowing economic growth.
With this level of inflation, it makes one wonder whether imposing these tariffs right now is the best time to do this. It may prove difficult to achieve the goal of reducing inflation without slowing economic growth.
ReplyDeleteconsumer confidence pared with high inflation is definitely only going to push the difference in consumer and producer behavior.
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