Data released by the U.S. Department of Commerce on Thursday showed that, driven by a surge in energy prices, the Personal Consumption Expenditures (PCE) index rose 3.8% on an annualized basis in April—the highest level since Donald Trump returned to the White House; the core PCE, excluding food and energy, rose 3.3% on an annualized basis. The department also revised down its estimate for first-quarter gross domestic product (GDP) growth from 2% to 1.6%. Although the April inflation data came in below most economists' expectations, Inflation Insights analysts warned that core inflation may strengthen next month, as the lagging impact of rising energy prices continues to pose upward risks. Escalating inflation, economic slowdown, and the ongoing war in Iran are collectively increasing political pressure on Republicans ahead of the midterm elections. According to AAA data, gasoline prices in the United States have remained above $4 per gallon for several weeks due to the war; long-term Treasury yields and mortgage rates have also risen alongside inflation and growing government debt. Despite continued resilience in the U.S. economy—evidenced by low unemployment, strong stock markets, and better-than-expected corporate earnings—consumer confidence has significantly deteriorated.
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