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Strong U.S. consumer spending in August demonstrates economic resilience, but inflation heats up under the influence of tariffs
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Hello everyone, today XM Forex will bring you "[XM Forex Official Website]: The strong US consumer spending in August demonstrates economic resilience, but inflation heats up under the influence of tariffs." Hope it will be helpful to you! The original content is as follows:
The U.S. Department of xn--xm-6d1dw86k.commerce reported Friday that consumer spending rose 0.6% in August, surpassing economists' expectations of 0.5%, reflecting strong demand for families on vacation and catering, and the economy maintained steady growth momentum in the third quarter. However, inflation continued to rise, partly affected by the Trump administration's import tariffs.
The report shows that the economy continued its growth momentum from April to June. Low layoffs and corporate demand for equipment show that economic resilience remains, reducing the possibility of the Fed's interest rate cuts again this year. However, the labor market has difficulty recruiting, employment growth has almost stagnated in the past three months, and tightening immigration policies have further reduced the labor supply. "The data does not support the view of immediate and substantial interest rate cuts, and the need for monetary policy easing has not yet emerged." Data from the U.S. Department of xn--xm-6d1dw86k.commerce's Bureau of Economic Analysis showed that consumer spending accounts for two-thirds of economic activity, up 0.6% in August and 0.5% in July. Service expenditure (such as air travel, catering, hotel accommodation) increased by 0.5%, and xn--xm-6d1dw86k.commodity expenditure increased by 0.8%. High-income families have become the main consumer force due to rising stock markets and rising housing prices. Federal Reserve data shows that U.S. household wealth reached a historical high of $176.3 trillion in the second quarter.
However, low-income households are facing greater pressure as tariffs push up xn--xm-6d1dw86k.commodity prices and cuts in food stamp programs. In August, personal income increased by 0.4%, mainly driven by government payments such as social security. Wages rose by only 0.3%, reflecting the weak labor market. Savings rate fell to 4.6% from 4.8% in July, for eight monthsCome to the lowest.
Strong consumer spending drives annualized GDP growth of 3.8% in the second quarter. The Atlanta Fed raises its third-quarter GDP growth forecast to 3.9% from 3.3%. The Federal Reserve cut interest rates by 25 basis points last week, adjusting the interest rate range to 4.00%-4.25%. The market is expected to cut interest rates twice this year, with the stock market rising, the US dollar weakening, and the yield on government bonds basically stable.
Inflation pressure rises
In August, the personal consumption expenditure (PCE) price index rose 0.3% month-on-month, higher than 0.2% in July and 2.7% year-on-year, the largest increase since February. The core PCE price index (excluding food and energy) increased by 0.2% month-on-month and 2.9% year-on-year. Service prices rose 0.3%, driven by air tickets, hotels, financial services and housing prices. xn--xm-6d1dw86k.commodity prices rose only 0.1%, as declines in leisure and automobile prices offset some of the gains.
xn--xm-6d1dw86k.companies have previously eased price pressure by clearing inventory and absorbing some tariff costs, but economists expect this buffering effect to gradually weaken and tariff costs will be passed on to consumers in the future. Shannon Grein, an economist at Wells Fargo, pointed out: "The full impact of tariffs has not yet appeared, and changes in corporate behavior indicate that inflationary pressure will be further increased."
The strong performance of consumer spending in August was driven mainly by high-income groups, and service consumption (such as travel and catering) continued to grow, indicating the economy's resilience in a high-inflation environment.
Low-income households are under pressure due to rising cost of living and a decline in savings rates due to tariffs, and the sustainability of consumption growth is questionable. Consumption mainly relies on the wealthy class, with intensifying economic differentiation and weak labor markets likely to further drag down growth.
Goldman Sachs economist Michael Pearce expects core inflation to reach 3.8% by the end of the year as corporate inventory buffers weaken.
Recent concerns about inflation by Fed officials
Tariffs have pushed up prices of imported goods, and rising service prices have further exacerbated inflationary pressures. Service inflation rose from 3.5% to 3.6%, beef and utilities prices rose by 13.9% year-on-year, and the tariff effect is gradually emerging.
Federal Chairman Powell recently said that tariffs have limited long-term impact on inflation, but will push up prices in the short term. Director Christopher J. Waller called for accelerating rate cuts to cope with weak labor markets.
The market's expectations for the Fed's two interest rate cuts this year remain unchanged, but the sluggish job market and inflationary pressures have added uncertainty to policy making.
The attention to inflation within the Federal Reserve was further highlighted after the FOMC meeting in September. In his speech on September 23, Powell stressed that the uncertainty of the inflation path remains high and officials need to ensure that the price increase caused by tariffs does not evolve into persistent problems.
Chicago Fed Chairman Austan Goolsbee pointed out in an interview,Inflation has not yet fully returned to its 2% target, which remains the central challenge for the Federal Reserve.
In addition, the FOMC statement made it clear that inflation has rebounded and maintained at a high level and the xn--xm-6d1dw86k.commission is vigilant about risks on both sides of its dual mission.
These views reflect that despite the launch of interest rate cuts, several officials are cautious about the potential upward pressure on inflation, especially under the continued influence of tariff policies.
The above content is all about "[XM Forex Official Website]: The strong consumer spending in the United States in August demonstrates economic resilience, but inflation heats up under the influence of tariffs". It was carefully xn--xm-6d1dw86k.compiled and edited by the editor of XM Forex. I hope it will be helpful to your transactions! Thanks for the support!
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