A key indicator of the inflation increased in May, in the most recent sign that Prices are still stubbornly high, while Americans also reduced their expenses last month.
Prices increased 2.3% in May compared to the previous year, compared to 2.1% in April, the Commerce Department reported. Excluding the volatile food and energy categories, underlying prices increased 2.7% compared to the previous year, an increase with respect to 2.6% of the previous month. Both figures are modestly above the objective of 2% of the Federal Reserve. The Fed follows up to the underlying inflation because it usually provides a better guide on where inflation is directed.
At the same time, The Americans reduced spending for the first time since January, since total spending fell 0.1%. The income decreased a pronounced 0.4%. Both figures were distorted by unique changes: cars spending collapsed, reducing total expenditure, because Americans rushed in spring to acquire vehicles to get ahead of tariffs.
And the income fell after a unique adjustment to social security benefits increased payments in March and April. The agency’s payments increased for some retirees who worked for state and local governments.
Even so, the data suggests that growth cools as Americans control the expense, partly because the tariffs of President Donald Trump have increased the cost of some goods, such as appliances, tools and audio equipment.
Consumer confidence has also fallen dramatically this year after the deployment of tariffs, which has been chaotic sometimes. And although the unemployment rate remains low, hiring has been weak, which has made people without a job have difficulty finding a new job.
Consumer spending increased only 0.5% in the first three months of this year, and has been slow in the first two months of the second quarter.
“Because consumers are not in a strong enough position to handle those (higher prices), they spend less on recreation, trips, hotels, such things,” Luke Tilley, Chief economist of Wilmington Trust, said.
Expenditure on air rates, foods in restaurants and hotels fell last month, according to Friday’s report.
At the same time, the figures suggest that the generalized tariffs of President Donald Trump continue to have a modest effect on general prices. The increase in the costs of some goods has been partially compensated with the fall in new car prices, air rates and apartment rentals, among other items. In fact, in monthly terms, inflation was mostly moderate.
Prices rose only 0.1% in May compared to April, According to the Department of Commerce, the same as the previous month. Underlying prices rose 0.2% in May, more than economists expected, and above 0.1% last month. Gasoline prices fell 2.6% only from April to May.
Economists point out several reasons why Trump’s tariffs have not yet accelerated inflation, as many analysts expected. Like American consumers, companies imported billions of dollars in goods during spring, before the levies entered into full effect, and many articles that are currently on store shelves were imported without paying higher tariffs. There are early indications that this is beginning to change.
Nike He announced this week that he hopes that the United States tariffs cost the company $ S1000 million this year. It will implement “surgical” price increases in autumn. He is not the first retailer to warn that there will be price increases when students return to school.
Walmart He said last month that his customers will begin to see higher prices this month and next as the purchases of return to classes enter high activity.
In addition, much of US imports are made up of raw materials and parts that are used to manufacture goods in the United States. It can take time that these increases in the costs of inputs are reflected in consumer prices. JP Morgan economists argue that many companies absorb, for now, the cost of tariffs. Doing so can reduce your gain margins, which could affect hiring.
Inflation cooling has made the Federal Reserve and its president, Jerome Powell, are in the public eye. The Fed increased its short -term interest rate by 2022 and 2023 to decelerate the economy and combat inflation, which reached a maximum of four decades almost three years ago. Now that price increases are almost close to the objective of the Fed, some economists – and some officials of the agency – say that the Central Bank could reduce its rate to a level that does not slow or stimulate growth.
Trump has also repeatedly attacked the Fed for not cutting the rates, qualifying Powell as “fool” and “fool.”
But the official said in a testimony to Congress earlier this week that Fed wants to see how inflation and economy evolve before cutting the rates. Most other officials responsible for the agency’s policy have expressed a similar opinion.
Source: Ambito
