Inflation is hurting lower-income Americans. They're being more cautious with their spending due to higher expenses and debt servicing. On the other hand, affluent consumers continue to spend, leading to a "K-shaped consumer" pattern. Despite high employment, the pressure of rising living costs is taking its toll on lower-income Americans.
The Federal Reserve (Fed) decided not to lower interest rates at its Wednesday meeting, believing inflation remains too high. Inflation is currently 2.7%, above the Fed's target of 2%, and prices are not declining as quickly as hoped. Despite concerns about the economy slowing down, the Fed believes reducing inflation is a priority. The Fed also slightly eased its bond-buying limitations in a modest attempt to stimulate the economy.
Inflation is still rising, making it difficult for consumers to afford everyday items. As a result, people are cutting back on spending, which is hurting companies that sell consumer products. McDonald's, 3M, and Newell Brands have reported lower sales because of this trend.
The US economy is thriving despite slowing pandemic recovery, with low unemployment and high spending. However, this strength poses a challenge in addressing rising inflation. The IMF projects continued growth, higher than Europe's, but warns that overheating is a risk. To tackle inflation, the Federal Reserve will keep interest rates high, despite concerns, as the economy remains resilient and robust.
Economic growth slowed to 1.6% in the first quarter of 2024, below expectations. Meanwhile, inflation jumped to 3.4%, its highest rate in a year. Consumer spending also slowed, indicating consumers are starting to feel the pinch of rising prices. The report suggests the economy is facing challenges, with slower growth and higher inflation.
China's economy grew unexpectedly in the first quarter of 2023, despite concerns about its slowing recovery. Growth reached 5.3%, bolstered by government spending on infrastructure. However, challenges remain, including a struggling real estate sector, heavy local government debt, and weak consumer spending. The government aims for 5% growth this year but economists are cautious due to last year's inflated growth and the uneven recovery.
