The latest data from the Commerce Department indicates that inflation pressures are easing, with prices rising just 0.1% from July to August. This marks a decrease from the previous month's 0.2% increase. Year-over-year, inflation has fallen to 2.2%, down from 2.5% in July, hovering just above the Federal Reserve's 2% target.
The cooling of inflation may impact public sentiment on the economy, as reflected in recent surveys. Respondents are now divided on whether President Donald Trump or Vice President Kamala Harris would handle the economy better, a shift from previous disapproval of President Joe Biden's economic policies.
The report also highlights that grocery costs remained stable last month, while energy costs decreased by 0.8%, driven by lower gasoline prices. Excluding food and energy costs, core prices rose by 0.1% from July to August, falling below the Fed's 2% target for the fourth consecutive time.
Economists like Samuel Tombs of Pantheon Macroeconomics suggest that inflation is no longer a major concern, given the recent decline. The Federal Reserve responded to these trends by cutting its benchmark interest rate by half a percentage point, with plans for further reductions in the coming months.
Additional data shows that Americans' incomes and spending saw modest increases last month, with a savings rate of 4.8% in September. The revised figures also indicate that consumers were in better financial shape than previously reported.
The government's recent report on economic growth revealed a healthy 3% annual pace in the second quarter of the year, with upward revisions for growth figures dating back to 2018.
Despite these positive indicators, the Fed remains cautious about further rate cuts, aiming to ensure that inflation continues to cool before making significant adjustments. The economy continues to show signs of strength, with low unemployment claims, increased consumer spending, and improved industrial production.
Overall, recent economic data suggests a positive outlook, with consumers showing resilience in the face of inflation and borrowing challenges. The Federal Reserve's focus on managing inflation and supporting economic growth remains a key priority in the coming months.
