An important inflation measure reached its highest level since 1991.
As the Bureau of Economic Analysis revealed, personal consumption spending rose by $130.5 billion dollars in August — representing a 4.3% year-over-year hike in the Personal Consumption Expenditures Price Index.
The PCEPI — used by the Federal Reserve to set its inflation rate targets — has risen for the past several months. In April, the metric hit a 3.6% year-over-year growth rate before rising to 4.0% in June and 4.2% in July.
Also in August, personal income rose by $35.5 billion and disposable income rose by $18.9 billion. Government stimulus measures — especially the Child Tax Credit — played a significant role in the higher income levels.
Because the $130.5 billion increase in expenses vastly outpaced earnings, however, the Bureau of Economic Analysis’ findings show that purchasing power is diminishing.
Lawmakers have been noting the threat that inflation poses to their constituents’ wages. For instance, Sen. Joe Manchin (D-WV) recently wrote to Fed Chair Jerome Powell:
With the recession over and our strong economic recovery well underway, I am increasingly alarmed that the Fed continues to inject record amounts of stimulus into our economy by continuing an emergency level of quantitative easing (QE) with asset purchases of $120 billion per month of Treasury securities and mortgage backed securities.
The record amount of stimulus in the economy has led to the most inflation momentum in 30 years, and our economy has not even fully reopened yet. I am deeply concerned that the continuing stimulus put forth by the Fed, and proposal for additional fiscal stimulus, will lead to our economy overheating and to unavoidable inflation taxes that hard working Americans cannot afford.
Meanwhile, consumer-facing businesses have increased prices amid the high-inflation environment.
Tyson Foods — the second-largest meat and poultry producer in the United States — hiked its average price for pork by 39%, for chicken by 16%, and for beef by 12%. Nestlé, the world’s largest food and beverage company, revealed its intention to hike prices by 2% in order to offset 4% cost increases.
According to a recent survey, Americans forecasted a 9% year-over-year increase in their back-to-school spending. Last year, they anticipated spending $247; this year, they anticipated spending $268.
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