According to a recent report from the Department of Commerce, inflation appears to be slowing down for the first time since November of 2020, ending a steady climb in the inflation gauge for the U.S. that culminated in a four-decade high in March.
The personal consumption expenditures (PCE) price index, which is tracked by the Federal Reserve, reported a 6.3 percent jump in the past 12 months since April, a 0.3 percent drop from 6.6 percent in March.
Though the effects of this minor slowdown are unlikely to be felt in the short term by Arizonans, many of whom are struggling with record high gas prices caused by supply disruptions and rising living costs, there are signs that inflation is slowing down. This spells out a positive economic trajectory for the nation that could see prices for consumer goods finally stagger amidst a rise in cost for everything ranging from food, gas, to home appliances.
The optimism is undergirded by solid consumer spending numbers, which rose 0.9 percent in April and accounts for over two-thirds of the U.S. economy. Most notably, this makes it the fourth consecutive month in which the increase in consumer spending has been outpacing the inflation rate, suggesting that American spending habits haven’t been significantly altered by inflation.
Elsewhere, goods spending increased by 0.8 percent, while service spending increased by 0.9 percent, suggesting a consumer pivot towards purchasing services over electronics and appliances in contrast to earlier on in the pandemic. This forecasts a rise in cost for things such as airplane tickets, restaurant bills, and hotel prices.
While high consumer spending numbers are a positive, it also presents the double-edged problem of maintaining inflation prices, potentially making the Federal Reserve’s attempt at curtailing inflation more difficult in the long run.
Prices increased by 0.2 percent from March to April, a drop from the 0.9 percent increase from February to March. Yet for specific cities, inflation and costs can be significantly higher than the national average, such as Phoenix which has one of the highest inflation rates in the country, sitting at 11 percent.
“A dozen roses is now $80,” notes a resident in Phoenix on Mother’s Day, amidst rising living costs that place an especially heavy burden on low-income communities in the state.
Elsewhere, a 4.4 percent saving rate, the lowest since September 2008, suggests that households are spending their savings from the pandemic, forecasting slower consumer spending down the line.
As the Federal Reserve attempts to curtail inflation back to two percent, economists worry that the U.S. might enter into a recession, one which would be compounded by a litany of international issues including Russia’s war on Ukraine, China’s economic slowdown, and the COVID-19 pandemic.