Inflation and the Economy
Just pulling together a couple of different source reports which briefly and pretty much say similar. We are still not sure which way the economy is going. In reality, the outcome is more likely than not is in the hands of Trump and his knee-jerk reactions. We are at a pivotal point.
Surveys of Consumers, University of Michigan
Surveys of Consumers Director – Joanne Hsu, Surveys of Consumers, University of Michigan
Consumer sentiment lifted 2.3 index points in early December, within the margin of error. This month’s increase was concentrated primarily among younger consumers. Overall, while views of current conditions were little changed, expectations improved, led by a 13% rise in expected personal finances, with improvements visible across age, income, education, and political affiliation. Still, December’s reading on expected personal finances is nearly 12% below the beginning of the year. Similarly, labor market expectations improved a touch but remained relatively dismal. Consumers see modest improvements from November on a few dimensions, but the overall tenor of views is broadly somber, as consumers continue to cite the burden of high prices.
Looking to the future, year-ahead inflation expectations decreased from 4.5% last month to 4.1% this month, the lowest reading since January 2025. This marks four consecutive months of declines, but short-run inflation expectations are still above the 3.3% seen in January. Long-run inflation expectations softened from 3.4% last month to 3.2% in December, matching the January 2025 reading. In comparison, 2024 readings ranged between 2.8 and 3.2%, while the readings in 2019 and 2020 were below 2.8%. Inflation uncertainty over both time horizons (as measured by the interquartile range of responses) remains higher than January of this year.
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Partial taken from QUARTZ . . .
“Inflation cools in delayed CPI report but complicates Trump’s narrative,” Catherine Baab, QUARTZ.
Still, the numbers carry great weight
Per Reuters, economists had widely expected inflation to come in closer to 3.1% headline and 3% core, figures well above the Fed’s long-stated comfort zone of 2% and one that would suggest prices remain stubbornly high and rising. Whether inflation holds a “two handle” or drifts back into the threes has taken on outsized importance for markets heading into 2026, and at least on that front, November’s data came in somewhat better than feared.
Even as the lack of month-to-month detail makes it hard to determine exactly what’s driving inflation beneath the surface, the broader story is familiar to analysts — and consumers. The prices of some line items, particularly for furniture and “household operations” (which covers everything from garden tools to dishes) are rising as companies begin to pass through higher import costs brought on by tariffs. Just as unsurprisingly, rents and housing remain stubbornly expensive, up 3% over last year. The price of meat, poultry, and eggs is up almost 5% in the last 12 months.
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AB: Two reports on the economy. Basically, saying a wait and see. Neither of the reports agree with Trump’s report on the economy. I listened last night to Trump. I was left with the feeling his report was all about him and not the nation. One thing to keep in mind. Even if the tariffs imposed by Trump do not impact a particular product, you can still expect the price will rise. Companies will take advantage of an event.