Inflation continued to run hot in July, underlining the Federal Reserve’s dilemma as it looks to lower prices for American consumers while propping up a job market that is starting to wobble.
Prices across the U.S. rose at an annual rate of 2.6% last month, according to personal consumption expenditures data released on Friday. That’s the same figure as in June, a sign inflation remains persistent. Stripping out volatile food and energy prices, inflation in July actually ticked up to 2.9% from a year ago, up from 2.8% in June.
Read on for a breakdown of Friday’s PCE report.
How are consumers faring?
The latest PCE data shows that consumer spending rose 0.5% in July, suggesting that Americans are continuing to open their wallets even in the face of economic uncertainty.
But while people continue to spend, many consumers are increasingly having to make trade-offs on what they spend their money on, Gregory Daco, chief economist at EY-Parthenon, told CBS MoneyWatch.
“Consumers are trying to push through — they’re doing the best they can, but they’re increasingly under pressure, and therefore they’re being more cautious with discretionary outlets,” he said. “They travel less. They spend less on restaurants, spend more cautiously on transportation.”
Such caution can augur a deeper slump given that consumer spending accounts for roughly two-thirds of economic activity. The closely watched University of Michigan consumer sentiment survey, released Friday, showed that Americans are increasingly concerned about inflation.
Although inflation has cooled significantly since peaking in 2022, it remains stubbornly above the Fed’s 2% annual target. And consumers continue to feel the pain in the form of higher prices for some groceries as well as rising electricity costs. Another key inflation gauge — the Consumer Price Index — shows that the price of coffee was up 14.8% from a year ago, while beef and egg costs were 15.5% and 16.4%, respectively.
Are tariffs impacting inflation?
Not yet. In a positive sign, the price of goods, which are most susceptible to tariffs than services, cooled slightly in July, the PCE data shows, decreasing 0.1% from the month prior. That suggests tariffs have had a minimal impact on prices so far.
“It’s not showing up in a goods prices, in the government statistics at least,” Adam Crisafulli, head of Vital Knowledge, told CBS MoneyWatch.
Still, analysts say inflation could bare its teeth more in the…
Click Here to Read the Full Original Article at Home – CBSNews.com…