The Federal Reserve recently reported that price increases accelerated in May based on readings utilizing their inflation gauge, the Personal Consumption Expenditures (PCE) index. With inflation rates remaining above the target rate of 2% and the continued price increases, consumer spending is seeing a sharp decline.
In reviewing the PCE index in May, analysts found that the “core” PCE index, which removes food and energy costs from the equation, rose 2.7% on an annual basis. This rate is higher than the originally expected 2.6% and the 2.6% increase seen in April. Core prices rose 0.2% over May, again higher than what economists had originally expected.
The recent readings also determined that economic growth activity has slowed, with personal spending decreasing 0.3% in May following an increase in April (0.1%). This decrease is significant alongside the data showing a 0.4% decrease in personal income in May, which is far below the 0.7% increase seen in April.
In an article from Yahoo! Finance, Michael Pearce of Oxford Economics shared that the decrease in spending may be largely in part due to the newly implemented tariffs.
“The trend in parts of discretionary spending has weakened, and we expect a further slowdown in the coming months as tariffs begin to weigh on real disposable incomes,” Pearce stated in the article.
As prices continue to rise, consumers are looking to save as much money as possible to prepare for any potentially drastic changes in the future. Price increases may also result in consumers taking on more debt burdens than they are prepared for, causing more financial stress and uncertainty.
If you are experiencing higher debt burdens and are wondering what your next steps should be, the attorneys at Sader Law Firm are here to help figure out what may be your best course of action. Contact us at (816) 561-1818 for a free phone consultation and learn more about how bankruptcy may be the right path for you.