Key inflation gauge worsens as Americans’ income and spending power erodes
AP News • • business
Key Points:
- Inflation in the U.S. rose to 3.8% in April, the highest level in three years, with prices increasing for gasoline, groceries, clothing, and electricity, putting financial strain on Americans ahead of midterm elections.
- Core inflation, excluding food and energy, climbed to 3.3% in April, the highest since October 2023, leading to speculation that the Federal Reserve may consider raising interest rates rather than cutting them this year.
- Despite rising inflation, President Trump and Treasury Secretary Scott Bessent downplayed concerns, with Trump calling gas price increases "peanuts" and Bessent describing inflation as "transitory."
- Americans’ after-tax, inflation-adjusted incomes fell for the third consecutive month, while inflation-adjusted spending barely increased, signaling growing financial stress among households.
- The U.S. economy grew at a modest 1.6% annual rate in the first quarter, supported by consumer spending and business investment in artificial intelligence, but growth slowed and inflationary pressures remain due to factors like tariffs and rising costs of services.