Americans are still shopping, despite climbing energy costs
Summary
Income and consumer spending in the U.S. are growing despite rising inflation and higher energy costs. This situation makes it harder for the Federal Reserve to decide if interest rates should go up to cool down the economy.Key Facts
- Personal income, disposable income, and consumer spending each rose by 0.7% in May.
- Inflation measured by the Personal Consumption Expenditures (PCE) Index increased 4.1% over the past year.
- Core inflation, which excludes food and energy, rose 3.4% year-over-year, both reaching the highest levels in about three years.
- Rising energy prices have not stopped Americans from spending on goods and services.
- The Federal Reserve’s preferred inflation gauge shows inflation still above the Fed’s target despite some easing since February.
- The recent drop in oil prices may help reduce inflation in the future, but supply issues linked to AI technology are causing new price pressures.
- Some companies like Apple are raising prices to cover higher costs for computer memory chips.
- Financial markets expect the Federal Reserve to raise interest rates later this year to control inflation, but the Fed has kept rates steady for now.
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