Economy picked up in early 2026, but inflation jumped, too

 Within the first three months of 2026, the U.S. economy grew at a 2% pace, an improvement after a slower end to 2025. Alongside this growth, consumers have shown fatigue amid rising prices, and the economy is running below the Congressional Budget Office's estimate of the economy's potential to grow without aggravating inflation.

While businesses continue to drive growth by investing more, especially in AI, consumers are feeling the pressure. Regular gasoline is averaging $4.30 per gallon, which is a four-year high. These high prices are making people more cautious with spending and has the potential to slow the economy again.

The big idea of this article is to stress that growth does not always equal stability. The economy is technically improving, but rising costs make it more difficult for people to feel that progress in their daily lives.

Spirit Airlines shuts down as company says it can’t keep up with higher oil prices

    Spirit Airlines, which is known for being very low-cost, has shut down after years of financial problems. They had been dealing with debt for a long time and had already been through the bankruptcy process twice. It might've helped them in the short run, but it never really fixed the overarching problems. On top of this, higher fuel prices, higher operating costs, and tougher competition in the airline industry made it even harder for them to remain profitable. Even with demand for travel rebounding after the pandemic, Spirit was never able to get its finances worked out.

    In some of their final days, there was a last effort to keep the airline alive. This was through a bailout or takeover idea that had connections to the Trump administration. This idea depended on getting approval from creditors and other stakeholders, which ultimately never happened. After this, Spirit had no realistic path forward and started shutting things down. Flights were cancelled, leaving passengers trying to find new last-minute flights. If tickets were bought straight from Spirit, they had a reserve to refund these customers. Other airlines offered $200 one-way tickets for confirmed Spirit ticket holders. Overall, Spirit shows how risky the ultra-low-cost airline structure can be when costs suddenly rise, and there's no cushion to absorb it.

https://apnews.com/article/spirit-airlines-trump-bailout-bankruptcy-37a4818e1b71c0905d022f669d85948c

The Cost of AI in the Eyes of Investors

     In a recent article from the The Epoch Times, big tech companies like Google, Meta, and Microsoft just released their latest earnings reports, and while they’re making a large sum of profit, they’re also spending a massive amount of money on AI. Essentially, building the infrastructure needed for AI, like huge data centers and expensive computer chips is costing investors billions of dollars. Google seems to be handling it the best so far because they’re only using about half of their extra cash to pay for these upgrades. However, investors are getting a bit nervous about companies like Microsoft and Meta because they’re spending a much larger chunk of their money just to keep up in the AI race.
    This shows that the AI boom phase is finally starting to wear off. Before, everyone was just excited about the idea of AI, but now investors are starting to ask the questions of when do we actually make money from this? It’s not enough to just spend billions on new tech anymore, these companies have to prove that AI is actually going to pay off soon. If they don’t start showing real results or new ways to make profit in the next few months, we might see their stock prices take a hit as people realize how expensive this whole AI investment really is. 

https://www.theepochtimes.com/business/big-tech-posts-strong-earnings-as-ai-spending-pressures-cash-flow-6020476

Supply Shocks? We’ve Had a Few. Here’s How Investors Can Deal

The article explains that the economy is currently facing a series of supply shocks, which are sudden disruptions that limit the availability of goods, labor, or energy. These shocks are difficult for the government to manage because their tools, like changing interest rates, cannot fix broken supply chains or provide more oil. For investors, these events are particularly challenging because they can cause prices to rise while economic growth slows down.

To deal with this uncertainty, the author suggests that investors move beyond simply planning for the most likely outcome. Instead, they should use scenario analysis to test how their portfolios would handle various situations such as a prolonged energy crisis. The article recommends focusing on resilience by investing in high-quality companies with economic moats that can pass higher costs on to customers. They say that diversification remains essential but investors are warned that traditional bonds may not provide protection during high inflation periods. The goal for investors is to prepare for a wider range of risks rather than betting on a single economic path.

As seen in the IS-LM models discussed in class this supply shock might have different impacts in the economy. There might be an decrease in GDP, an increase in interest rates, and an increase in price levels. 

https://www.morningstar.com/economy/supply-shocks-weve-had-few-heres-how-investors-can-deal 

The Tariff Refund Process is Underway

     Two months after the Supreme Court struck down President Donald Trump's sweeping tariffs, American importers can apply for reimbursement starting Monday through a new US Customs and Border Protection portal. The refunds are expected to be returned within 60 - 90 days of applications, but could take longer depending on whether additional reviews of entries are merited. For the first phase of the refunds, only entities that have made certain tariff payments will be able to make refund requests, but it is still unclear when the system will open for all payments that are subject to a refund. 

https://www.cnn.com/2026/04/20/economy/tariff-refund-process-kicks-off 

The United States Just Found a Century of Lithium on Its Own Soil

The recent U.S. Geological Survey estimate that the eastern United States may hold about 2.3 million metric tons of lithium resources shows how domestic geology could reshape the economics of the energy transition. This endowment could replace current U.S. lithium imports for roughly 328 years at 2024 import levels, signaling a potential long run shift in the country’s external position on a key critical mineral. Moving from near total import dependence to a multi century domestic resource base would change expectations about trade balances, investment, and energy security far beyond the mining sector.

About 1.4 million metric tons of lithium oxide are estimated under North and South Carolina, with roughly 0.9 million metric tons across Maine and New Hampshire, together enough, on paper, to supply batteries for around 130 million electric vehicles and over a million large scale storage systems. Global lithium demand has grown at double digit annual rates, and the U.S. imports almost all of its primary lithium, so even bringing 20 to 30 percent of the 2.3 million ton resource into production would yield hundreds of thousands of tons of domestic supply, shifting billions of dollars of future imports into domestic capital formation, wages, and tax revenue. These figures turn the idea of resource security into concrete outcomes linked to current account balances, industrial policy, and the location of new manufacturing clusters.

The size of the resource sets an upper bound, but actual outcomes will be limited by permitting timelines, environmental and community resistance, and the volume of investment over the next decade. Large U.S. mining and processing projects often take 7 to 10 years to move from concept to production, and the eastern lithium belt runs through populated regions with strong local political voice, slowing or reshaping projects. The key transition is from treating lithium as a fixed import constraint to treating it as a variable shaped by domestic choices, with different development paths for the 2.3 million ton resource leading to distinct trajectories for trade balances, investment, and the pace of the energy transition.

US weekly jobless claims decrease as labor market conditions remain stable

The Federal Reserve is currently keeping interest rates at a moderate level, around 3.5% to 3.75%, in order to control inflation. When interest rates are higher, it becomes more expensive for people and businesses to borrow money, which reduces spending and investment. This helps slow down the overall economy and prevents prices from rising too quickly.

At the same time, the Federal Reserve has to be very careful with its decisions. If interest rates are raised too much or kept high for too long, it could reduce economic growth and lead to a recession. Because of this, the Fed is trying to find a balance between lowering inflation and maintaining a stable, growing economy without causing major job losses..

Source : https://www.reuters.com/business/us-weekly-jobless-claims-decrease-labor-market-conditions-remain-stable-2026-04-30/

AI-related investment, rebound in government spending drive US economy in first quarter

  The job market in the U.S. remains strong, with unemployment staying relatively low at around 4.3%. Many companies are holding onto their workers and layoffs are limited, which helps keep income stable for many households. This stability is a positive sign for the overall economy.

However, hiring has slowed down compared to previous years, meaning it may be harder for new job seekers to find opportunities. While the job market is still healthy, economists are paying attention to whether this strength can continue if economic conditions change.

Source : https://www.reuters.com/sustainability/sustainable-finance-reporting/us-growth-picks-up-first-quarter-2026-04-30

Economy picked up in early 2026, but inflation jumped, too

 Inflation has started to increase again, with prices rising around 3–3.5%, which is above the Federal Reserve’s target of 2%. A major reason for this increase is higher energy and gas prices, partly caused by global tensions and supply issues. As a result, everyday goods and services are becoming more expensive for consumers.

This rise in inflation reduces people’s purchasing power, meaning their money does not go as far as it used to. If inflation continues to rise, it could put pressure on both households and businesses, making it harder to save money and plan for the future.

Source : https://www.washingtonpost.com/business/2026/04/30/economy-gdp-growth-first-quarter/

U.S. economy grew 2% in the first quarter, helped by AI boom and reversal of shutdown effects

 The U.S. economy is currently growing at a moderate pace, with GDP increasing by about 2% in early 2026. This growth is being supported by strong investment in new technologies like artificial intelligence and continued government spending. While this shows the economy is stable, it is not growing fast enough to be considered a major boom.

At the same time, this steady growth suggests that consumers are still spending and businesses are still operating confidently. However, economists are watching closely because slower growth could become a concern if it continues, especially if other problems like inflation begin to worsen.

 source : https://www.axios.com/2026/04/30/gdp-q1-economy-trump? 

Economy Core inflation rate hit 3.2% in March as first-quarter growth disappointed at 2%

This report shows that inflation has stubbornly remained above the Federal Reserve's target level while economic growth has been modest. During the month of March, the core PCE rose 0.3% alone and 3.2% over the past year. Inflation reached 3.5% primarily due to the surge in energy prices in the U.S. While the economy did grow 2%, which is an improvement from Q4 of 2025, it still fell a bit below expectations. Despite higher prices in the economy, the job market still remains strong. Jobless claims are at their lowest since 1969, but with higher prices, many consumers are cutting back on spending. Given consumption has been a constant in recent years, this could be troubling if this trend continues. Overall, the economy is mixed; there is good job stability and growth in sectors such as AI, but with persistent inflation and higher prices, it's weighing on households. This is making it hard for the Federal Reserve to make a decision on what to do about interest rates. 

PCE inflation rate March 2026: 

Rising Corporate Profits

Corporate profits continued to reach all-time highs in late 2025, due to the growth in technology,  the steady growth of the economy, the increase in corporate market power, and the decrease in federal tax rates.  The investment boom happening in the tech sector- largely due to A.I.-has positive effects on the profit growth of sectors like healthcare and manufacturing. The lack of a large recession, which crushes profit growth, has helped as well. Simultaneously, the growth of larger firms means they have more price power and higher profits as things become concentrated. Lastly, there has been a steady four-decade-long decrease in the federal tax rate from 46% to 21%, as well as a fall in real interest rates. All of this means fatter margins for corporations who continue to have an optimistic outlook for profit margins ahead. 

Source: https://www.nytimes.com/2026/04/18/business/dealbook/corporate-profits-record.html

How Federal Reserve Interest Rates Are Shaping the Economy

 Over the past year, Federal Reserve interest rate policy has continued to play a major role in shaping consumer spending, business investment, and overall economic growth. With inflation still above the Fed’s long-term 2% target, policymakers have kept rates elevated rather than rushing into cuts. While this strategy is designed to control inflation, it also creates real pressure on consumers and businesses. Higher borrowing costs mean more expensive mortgages, auto loans, credit cards, and business financing, which can slow spending and investment. For everyday consumers, this often means less disposable income and tighter financial decisions, while businesses may delay expansion or hiring due to increased capital costs.

At the same time, these higher rates are helping cool inflationary pressures by reducing excessive demand, which is the Fed’s primary goal. According to Reuters, Federal Reserve Chair Jerome Powell recently emphasized that the U.S. economy remains resilient, but inflation risks and external pressures continue to justify a cautious monetary stance. This suggests the Fed is prioritizing long-term price stability over short-term economic stimulus.

From a macroeconomic perspective, this reflects contractionary monetary policy, where tighter money supply can reduce inflation but may also slow GDP growth if maintained too aggressively. Moving forward, the challenge for the Fed will be balancing inflation control without pushing the economy into unnecessary slowdown. In my view, current policy shows how interest rates remain one of the strongest tools for economic stabilization, even though the effects are felt differently across households and industries.

https://www.reuters.com/business/us-economy-quite-resilient-should-keep-growing-above-2-feds-powell-says-2026-04-29/?utm_source

Oil Prices Spike and Raise Fears of Economic Slowdown - Reuters

Oil prices have recently increased tensions in the Middle East, especially around the Strait of Hormuz, an important route for global oil shipments. Because so much oil passes through this area, any disruption causes prices to rise quickly.

As oil prices go up, it becomes more expensive to transport goods and produce energy. This leads to higher prices for everyday items, which increases inflation. Many economists are worried that if prices stay high, it could slow down economic growth around the world.

This situation is an example of a supply shock, where a decrease in supply leads to higher prices. If it continues, countries could face slower growth and rising costs at the same time. 

https://www.reuters.com/world/middle-east/global-oil-prices-rise-2026

These charts show how Iran’s economy is in freefall-- CNBC

 https://www.cnbc.com/2026/04/23/iran-economy-war-charts-rial-oil-strait-hormuz-blockade.html

The conflict between the United States and Iran is creating challenges for the already weak Iranian economy, sending it into freefall. The primary Iranian tactic to combat its Middle Eastern enemies has been economic restriction, primarily through a blockade of the Strait of Hormuz, limiting around 20% of the world’s oil supply. 90% of the nation’s annual trade passes through the strait, and its closure strikes both domestic demand/imports and exports to trading partners.  The nation is facing additional economic contractions, including severe inflation. In early 2026, food prices were inflated by more than 100%, with bread and cereals at 140% and oils and fats at 219%. The IMF predicts a shrinking of the Iranian economy by 6.1% in 2026. 

Despite these predictions, economists are facing difficulty in accurately tracking Iran’s economic data. The country has not self-reported GDP since 2024 and has been faced with widespread internet blackouts that make domestic statistics inaccessible. Nonetheless, the effect that the Strait of Hormuz closure has had can still be seen from foreign perspectives. Some hope that such a drastic impact will force Iran to negotiate a quick end to the conflict out of necessity. Senior Iranian economic officials have allegedly warned President Masoud Pezeshkian that it may take more than a decade to rebuild the Iranian economy if the conflict continues, which may be an internal factor applying pressure to the possibility of peace talks.

How the AI Boom Is Raising Electricity Costs in the U.S.

Artificial intelligence is not just changing technology, it is starting to affect household bills too. Reuters reported this week that electricity demand in the U.S. is rising partly because of the huge growth in AI data centers. The Energy Information Administration expects residential electricity prices to rise 5.1% in 2026 and another 2.4% in 2027, as utilities deal with higher demand, grid upgrades, and other rising costs.

A big reason is that AI needs enormous amounts of power. Reuters reported today that utilities like Entergy are expanding spending heavily to serve major data center projects, including Meta’s operations in Louisiana. That shows how the AI boom is creating real pressure on the energy system, not just the stock market.

This matters because when power companies spend more to build plants, transmission lines, and other infrastructure, those costs can eventually affect consumers. So even if someone never uses AI much, they may still feel its economic impact through a higher electricity bill. Overall, the AI boom is becoming more than a tech story it is turning into an everyday cost issue in the U.S. economy.

https://www.reuters.com/business/energy/us-consumers-face-rising-electricity-prices-despite-clean-power-savings--reeii-2026-04-28

Fed Interest Rate Decsion

 

In its April 2026 meeting, the Federal Reserve decided to hold interest rates steady, continuing its cautious approach to monetary policy. The decision reflects ongoing uncertainty about the direction of the economy, particularly regarding inflation and overall growth.

According to the article, the Fed is still concerned that inflation has not fully returned to its target, which makes it difficult to justify cutting rates too soon. At the same time, there are signs that the economy may be slowing, which creates pressure to avoid keeping rates too high for too long.

Because of this, the Fed is taking a wait and see approach, choosing not to make any major changes until more economic data becomes available. The Fed signaled that future policy decisions will depend on incoming economic data, particularly inflation trends.

Overall, the Fed’s decision shows the challenge of balancing inflation control with economic stability. For now, policymakers are choosing caution, leaving interest rates unchanged while closely monitoring the economy.

https://www.cnbc.com/2026/04/29/fed-interest-rate-decision-april-2026.html

The Fed, Frozen

Based on recent economic trends, many people are guessing the Fed will not cut interest rates anymore. However, some people warn that this assumption may be inaccurate. The war with Iran has increased oil prices, and people fear this conflict will cause an increase in inflation. But it seems likely that this war could end fairly soon. If this does occur and prices sink back to the same level as before the war, the Fed could resume the interest rate cuts that people expected before the conflict. The Chief Economist at Oxford Economics said that he believed the Fed would wait and see how the war progresses, but he still expects interest rate cuts before the end of the year. The short-term inflation expectations are fairly high, but the long-term expectations are lower. This once more supports the idea that when the war with Iran ends, the economy will resume to where it left off before the conflict.  

Another reason it seems likely the Fed would want to cut interest rates is that the country seems to be entering a phase of slow economic growth. In order to help stimulate growth and decrease unemployment, interest rates could be cut. Overall, it seems the Fed is currently just playing a waiting game, frozen until the war is resolved. Most people suspect the war will conclude soon, and then it seems likely that interest rate cuts will resume as well. 

https://www.investopedia.com/here-are-the-reasons-why-fed-rate-cuts-are-still-possible-11951320

We spoke to over 30 central bankers, policymakers and politicians. Here are their top concerns

 The war is drawn out at this point which leaves things uncertain. Policymakers think the biggest problem is not just the war but also there is no clear end and peace talks are uncertain. Uncertainty reduces investment and consumption. Higher energy prices go into global inflation. In the end slower global demand means there is weaker growth. Many officials are now worried about Stagflation which is high inflation with low economic growth. They say energy shocks push inflation up; uncertainty and higher cots push growth down. Some estimate that the inflation could rise to 2.5%, if these stays rising stagflation could occur.

Energy security is the main channel of impact. The biggest transmission mechanism is oil and flows which is through the strait of Hormuz. This is important because large share of oil passes through it. The risks that are brough up is the supply disruptions, shipping delays, and oil price spikes. These all have a impact with the global price shock.

Central bankers, politicians warn of global risks as Iran war drags on

Rising Recession Expectations

    Lately, there has been an increase in concern about a possible recession. What’s interesting is that expectations alone can influence economic behavior. When businesses think a slowdown is coming, they may cut back on hiring or delay investments. At the same time, consumers may spend less and save more if they’re worried about job security. This can actually slow the economy before a recession even begins.

    This connects closely to business cycles, since changes in confidence can push the economy from expansion toward contraction. Overall, rising recession expectations highlights that confidence in the economy is crucial. Even without a clear downturn yet, the shift in outlook alone can start to shape real economic activity.