In recent days, the economic landscape has been dominated by discussions about inflation and its potential impact on everyday American life. The increasing costs at grocery stores and gas stations are becoming more burdensome than they were a year ago, influencing the choices made by both families and businesses.
Here’s an overview of the key economic developments from the past week and their potential implications for consumers.
Key inflation gauge worsens, reaches highest level in 3 years
A critical measure of inflation, closely observed by the Federal Reserve, surged in April to its highest point in three years. This intensifying financial squeeze poses not only a challenge for American households but also a political hurdle for President Trump and congressional Republicans, especially with the midterm elections looming just five months away.
The Commerce Department reported on Thursday that inflation reached 3.8% in April, compared to the same period last year, rising from 3.5% in March. This marks the highest inflation rate since May 2023. Although the monthly increase was 0.4%, down from March’s 0.7% rise, it remains above the Federal Reserve’s comfort zone for inflation control.
The inflation report revealed that, beyond gasoline, the costs of groceries, clothing, and electricity are also climbing, indicating that inflation might be becoming more deeply rooted in the economy.
Consumer confidence slips as living costs race higher
U.S. consumer confidence declined slightly this month as gas prices stayed high and inflation remained elevated, a sharp contrast to soaring stock prices that have neared record levels.
The Conference Board’s consumer confidence index slipped 0.7 points to 93.1 in May, the first decline after three months of gains.
The index follows a separate gauge of consumer sentiment released last week by the University of Michigan, which fell to a record low this month. Spikes in gas prices as well as higher food costs have worsened inflation, which has outpaced the growth in average paychecks, reducing most Americans’ purchasing power. Americans have soured on President Trump’s economic policies, polls show, potentially creating problems for Republicans heading into the midterm elections.
Average US long-term mortgage rate hits highest level in 9 months
The average long-term U.S. mortgage rate rose again this week, reaching its highest level in nine months, another setback for prospective homebuyers.
The benchmark 30-year fixed rate mortgage rate rose to 6.53% from 6.51% last week, mortgage buyer Freddie Mac said Thursday. Despite the latest increase, the average rate remains below 6.89%, where it was a year ago.
When mortgage rates rise they can add hundreds of dollars a month in costs for borrowers, reducing their purchasing power.
Rates have been mostly trending higher since the war with Iran began, disrupting the passage of tankers ferrying crude oil from the Persian Gulf to customers worldwide. That’s sent oil prices sharply higher — a key driver of inflation.
US jobless claims rise, but layoffs remain low
More Americans sought unemployment benefits last week, but layoffs remain low despite economic uncertainty caused by the Iran war.
The Labor Department reported Thursday that jobless claims were up to 215,000, up from 210,000 the week before. The four-week moving average of claims, which smooths out week-to-week volatility, rose by nearly 6,300 to 209,000.
The number of Americans signing up for unemployment benefits — a proxy for layoffs — has stabilized in a low range of mostly 200,000 to 250,000 a week since the U.S. economy emerged from a brief but nasty pandemic recession in 2020.
The total number of people collecting jobless aid rose by 15,000 to 1.79 million the week that ended May 16.
The persistently low number of claims suggests that most U.S. companies have not resorted to layoffs. But even if they’re not cutting jobs, employers haven’t been adding many either. Last year, companies, nonprofits and government agencies added fewer than 10,000 jobs a month, the weakest hiring outside recession years since 2002.
Stocks add to all-time highs
Stocks rose on Wall Street Friday, adding to the all-time highs they set a day earlier.
The S&P 500 climbed slightly. The index is coming off six gains in a row and is headed for a ninth straight winning week, which would be the longest such streak since 2023.
Every major index is on track for records and to close out May with solid gains, despite worries about the U.S. war with Iran and its impact on inflation.
Markets in Europe and Asia mostly rose.