The inflation rate also exhibited a further downward trend and bore hints of what economists are expecting regarding an interest rate cut in September this year by the Federal Reserve.
In the BEA report that came out on Friday, the personal consumption expenditures (PCE) price index, which the Fed prefers to track as an inflation indicator, was up by a 0. 6% increase in July, after the 0. 1% rise in June. The indices of both overall and core PCE remained to exhibit an annual growth rate at a 2 percent level. 5% and 2. For 60 years and above, it was 5%, whereas for 18– 59 years, it was 6 % and the remaining 0. 2%, which is consistent with the previous month’s statistics.
Consumer expenditure also bucked the trend and rose 0. factor by cutting its monetary policy rate by 25 basis points to 5 percent in July after a similar move in June lowered it 0. 0. to 3% in June after rising by 3% in May while personal income has been rising gradually with the latest figure being 0. 3%. This was captured by Joseph Brusuelas, the Chief economist at RSM US in his post on social media platform X where he commented, “Disinflation amidst strong spending and solid income gains”.
Sustaining Economic Growth Intensifies As Inflation Rate Softens
These inflation figures come with an increase in second quarter Gross Domestic Product (GDP) upward estimation of 3% from a previously expected 2% annual growth. 8%. This has been accomplished mainly by maintaining consumers’ spending, which suggests the economy might be entering a so-called ‘soft landing’ – growth of the economy coupled with a gradual slowdown of the job market without hitting a recession.
“Another respectable report is that consumer spending and incomes are gradually but visibly increasing, and enough to continue the expansion,” said Robert Frick, corporate economist at Navy Federal Credit Union According to the poor July data and the recent one-year revision of almost 800,000 jobs negative, labor could be the weak link Although indicators such as a low number of layoffs to support the strong labor market, a robust employment report this Friday would do much to allay.
Federal Reserve says it is Thinking of Lowering Interest rates
Among these favorable trends, the Federal Reserve might cut interest rates in its next meeting this coming June. The Federal Reserve Chairman Jerome Powell alluded to such action this past summer during his speech in Jackson Hole Wyoming where he said it was time to lower the interest rates.
Back to this thinking, the Eurozone posted a reduction in inflation that stands at 2. 2% for August; This has declined from 2. Further, it declined to 6% in July, and this paved the way for the European Central Bank to possibly lower interest rates when the group meets on September 12.
Effects on the New 2024 Presidential Election Picture
The general perspective of the economy is also believed to bear a huge influence in the 2024 election of the president. Regarding economic issues, Trump was still using his claim that the economy is ‘broken’ as he attacks on Kamala Harris who is trying to address criticisms occasioned by the inflation rate recorded in the last three years of the pandemic.
These polls suggest a very close contest of the two contenders with Harris gaining more positive ratings on economic stewardship than Biden before his pulling out of the race late in July this year. Most of Harris’s economic plans are consistent with Biden’s policies with a focus on family and the middle class. On the other hand, Trump insists on the reintroduction of his former economic plan that mainly entails tax cuts and provocative commerce relations with China and other nations.
During the last two months of the election period, other factors that are expected to play an equally important role include immigration and reproductive rights.
Consumer sentiment shows how the social and political changes particularly the dynamics of the election affect the consumption pattern among the people.
The one that was published on Friday morning is a University of Michigan’s consumer sentiment survey that reveals a 1. UP by only 5% from the economic growth estimates made in July, which is 36% higher than the pace in the middle of the inflation point recorded in June 2022. Here the survey offers an understanding of how the changing election scenario is playing out in the perception of the economy.
The sentiment this month is calculated by having a small increase in the independents while democrats and republicans cancel each other almost to the degree, according to the survey director Joanne Hsu. Respondents from the Republican party reported the same kind of decline while from the Democrat, the response tenacity improved by 10%.
Hsu also added that these patterns stemmed from shifts in election expectations this month with Harris catapulted as the Democratic candidate for president. While, in July, the share of consumers who predicted Trump’s victory was 51% compared to only 37% who believed in Biden’s victory. August saw the election expectations turn over; 36% of the participants predicted Trump to emerge as the winner while 54% were for Harris. The economy and election are volatile expectations when the election is drawing close.
Conclusion
With the inflation rate now cooling, economic growth continuing in its steady state, and consumer sentiment gradually shifting, the picture of the U. S economy going into the fall is optimistic. With the expectation of further reduction of interest rates coupled with the upcoming elections in the United States of America in the year 2024, these factors are expected to attract broader central attention in the forthcoming period.
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