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Bloomberg\/Getty<\/p>\nBloomberg\/Getty<\/p>\n
Ask almost any economist and they will tell you: US President Donald Trump has been running risks with the world’s largest economy.<\/p>\n
They say his tariffs and crackdown on immigrants risk a return of 1970s-esque “stagflation”, when a sudden oil shock prompted stagnant growth and spiralling prices, except this time the crisis would be self-inflicted. <\/p>\n
The White House has just as steadfastly dismissed those concerns, attacking the experts – and, in the case of the US Bureau of Labor Statistics commissioner, firing her. <\/p>\n
Questions about how it will all play out have left the US central bank in a state of paralysis, as it waits for data to clarify what’s happening before making a move on interest rates. <\/p>\n
But after a busy few weeks of company updates, data on jobs and inflation, we still don’t really know. <\/p>\n
The labour market is sending clearly worrisome signals. <\/p>\n
Job creation was almost non-existent in May and June, sluggish in July, and the ranks of discouraged workers are growing. <\/p>\n
That 1 August jobs report sent the stock market sinking and Trump into a tailspin, prompting him to fire the BLS commissioner. <\/p>\n
A few days later, Moody’s Analytics economist Mark Zandi declared on social media that the economy was “on the precipice of a recession”.<\/p>\n
That’s not the consensus.<\/p>\n
For sure, the economy has slowed, growing at an annual rate of 1.2% in the first half of the year, down one percentage point from 2024.<\/p>\n
But consumer spending, despite weakening, has stayed more resilient than many had expected, despite downbeat assessments by some firms.<\/p>\n
Shares, after the 1 August hit, quickly resumed their upward march.<\/p>\n
“We continue to struggle to see signs of weakness,” the chief financial officer of JPMorgan Chase, America’s biggest bank, told investors last month. “The consumer basically seems to be fine.” <\/p>\n
That has raised hopes that the economy might power through, as it did a few years ago, to widespread surprise, despite getting hit with the highest inflation since the 1980s and a sharp rise in interest rates. <\/p>\n
On Friday, the US government reported that spending at retailers and restaurants rose 0.5% from June to July – and that spending in June had been stronger than previously estimated. <\/p>\n
“Consumers are down but not out,” wrote Michael Pearce, deputy chief US economist at Oxford Economics, which is predicting a modest recovery in spending in the months ahead, as tax cuts and a stock market recovery boost confidence. <\/p>\n
“With the sluggish yet resilient real economy, the labor market is unlikely to deteriorate sharply.”<\/p>\n
Challenges remain in the months ahead. <\/p>\n
For now, households haven’t seen a dramatic run-up in prices at the store that might force them to cut back.<\/p>\n
Consumer prices rose 2.7% in July compared with a year ago, the same pace as in June. <\/p>\n
But many forecasters had not expected higher prices to start appearing until later this year, especially after Trump delayed some of his most aggressive tariff plans until this month.<\/p>\n
Prices for hard-to-substitute, imported staples, <\/b>like coffee and bananas, have already jumped.<\/p>\n
Forecasters expect price increases to widen in the months ahead, as firms sell down pre-tariff stock and raise prices, now that they have more confidence about what the tariff policies might be.<\/p>\n
That’s why there was so much focus on the producer price index, which measures wholesale prices commanded by US producers before they hit consumers, offering a clue to what’s coming. <\/p>\n
It accelerated at the fastest pace in more than three years in July. <\/p>\n
And worryingly, both consumer and producer inflation show the uptick in prices is not limited to goods, suggesting stagflation might very well be staging a return. <\/p>\n","protected":false},"excerpt":{"rendered":"Bloomberg\/Getty Ask almost any economist and they will tell you: US President Donald Trump has been running risks…\n","protected":false},"author":2,"featured_media":347948,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5311],"tags":[49,978,659],"class_list":{"0":"post-347947","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-united-states","8":"tag-united-states","9":"tag-us","10":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@uk\/115035837168161922","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/347947","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/comments?post=347947"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/posts\/347947\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media\/347948"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/media?parent=347947"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/categories?post=347947"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/uk\/wp-json\/wp\/v2\/tags?post=347947"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}