Beautiful Virgin Islands

Monday, Oct 06, 2025

0:00
0:00

Inflation is at historic highs, but Americans are spending money like they don’t care

The most newsworthy economic data day used to be jobs, but as job growth continues to be strong, attention is increasingly focused on inflation. That’s because inflation continues to be at historic highs.
According to the Bureau of Labor Statistics, prices rose 1 percent in May alone and 8.6 percent in the past year, a bit higher than economists’ expectations and higher than the 8.3 percent increase in April.

Inflation has become a painful and constant reminder for consumers. They’re seeing inflation in energy, food and housing prices. Particularly as Americans are out traveling again after the pandemic, vacations also seem more expensive than they used to. One of the largest contributors to inflation in May in the “core” categories (i.e., excluding food and energy) was plane tickets, which are being driven up in price by strong demand and expensive fuel.

The question now is how American consumers will respond. Recent data shows that consumers are out and spending again, even if they’re not buying the patio furniture, exercise clothing and appliances they were before.

Managing Editor Kay Steiger grabbed Grid’s Domestic Economics Reporter Matthew Zeitlin to break down the latest inflation report.

With inflation, there are two stories. One is a set of goods and services that are very linked to the prices of commodities like oil and various grains. This includes food, gas, electricity and so on. Energy prices rose about 4 percent in May alone, with food going up over 1 percent, while the index that excluded food and energy was up “only” 0.6 percent in May.

The second big trend is in services. For a while, the story with inflation was that goods, especially durable goods (thinks cars, furniture, appliances), shot up in price because of huge demand from housebound consumers that then snarled supply chains all over the globe.

But now we’re seeing rising inflation in services — which was at 0.6 percent in May, almost double what it was at the end of last year. Service spending takes up a higher portion of overall spending and is thought by many economists to rise slower — but also fall slower as well.


The Bureau of Labor Statistics’ measures of hourly wages, which adjusts for inflation, fell 0.6 percent in May alone and 3 percent over the past year. The monthly fall was the result of 0.3 percent of earnings growth and the 1 percent inflation, while the weekly earnings figure fell 0.7 percent. In the past year, hourly earnings fell 3 percent while weekly wages fell 4 percent because of a slight decrease in average hours worked.

In the past year, energy inflation has been about four times higher than overall inflation, so it’s definitely dragging the number up. For gasoline specifically, there isn’t really an end in sight. Gasoline demand tends to really only substantially fall if there’s some kind of massive economic calamity. Right now, many expect American consumers to eagerly drive this summer and just face the pain at the pump.

With demand expected to be high, the only hope for price relief comes from supply, but that’s unlikely as investors in energy companies are now running them on a tight leash and because refinery capacity in the United States has actually fallen since before the pandemic. Meanwhile, the American embargo of Russian oil does not appear to be ending any time soon, nor does Russia’s invasion of Ukraine, which spiked food and energy prices all over the globe.

Nearly anywhere you look, there’s inflation. In the United Kingdom, inflation hit 9 percent in April, largely due to gas and electricity prices spiking. In the European countries that use the euro, inflation is up as well, even if the overall economies are somewhat sluggish. Europe is even more directly exposed to energy prices than the United States, thanks to the fact that much of it is dependent on Russia for gas and oil.

Like the United States, some European countries are seeing the highest rates of inflation since the 1980s, even if so-called core inflation, which excludes food and energy prices, is still elevated, even if less so than in the U.S.

Globally, the World Bank warned in a report this week that the economy risks a combination of sluggish growth and high inflation, otherwise known as stagflation, that could have “potentially harmful consequences for middle- and low-income economies alike.” Skyrocketing food and energy prices — and the risk of not just high prices, but actual shortages — have and could be devastating to lower-income countries. Sri Lanka has been thrown into an economic crisis and can no longer afford its fuel and food bill. Furthermore, the rise in interest rates in rich countries to curb inflation could hammer poorer countries as investors rush into rich countries offering high interest rates and leave poorer economies behind.

Jason Furman, a former Obama administration economist and a persistent critic of the Biden administration and Federal Reserve’s approach to stimulus, has argued that the differences in how inflation has been experienced in Europe and the United States is due to the United States doing more fiscal stimulus, running the economy hotter, and thus experiencing broad-based, higher inflation. Europe, Furman argues, did less to stimulate the economy, is growing less, spending less, and its high inflation is largely due to high energy costs. Furman even argues that the power of the American consumer and its splurge on goods in 2020 and 2021 even drove up inflation across the world by snarling supply chains and driving up goods prices globally.

On the other hand, there may be a difference in degree. The inflation in the U.S. is also driven by energy prices, and much of the increased purchases of goods can’t be attributed just to stimulus, but also to the unique economic conditions of the pandemic. And the Russian invasion of Ukraine and subsequent spike in food and energy prices has little to do with monetary policy or stimulus; it’s instead a genuine shock to the economy’s ability to supply key commodities.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
Munich Airport Reopens After Second Drone Shutdown
France Names New Government Amid Political Crisis
Trump Stands Firm in Shutdown Showdown and Declares War on Drug Cartels — Turning Crisis into Opportunity
Surge of U.S. Billionaires Transforms London’s Peninsula Apartments into Ultra-Luxury Stronghold
Pro Europe and Anti-War Babiš Poised to Return to Power After Czech Parliamentary Vote
Jeff Bezos Calls AI Surge a ‘Good’ Bubble, Urges Focus on Lasting Innovation
Japan’s Ruling Party Chooses Sanae Takaichi, Clearing Path to First Female Prime Minister
Sean ‘Diddy’ Combs Sentenced to Fifty Months in Prison Following Prostitution Conviction
Taylor Swift’s ‘Showgirl’ Launch Extends Billion-Dollar Empire
Trump Administration Launches “TrumpRx” Plan to Enable Direct Drug Sales at Deep Discounts
Trump Announces Intention to Impose 100 Percent Tariff on Foreign-Made Films
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Singapore and Hong Kong Vie to Dominate Asia’s Rising Gold Trade
Trump Organization Teams with Saudi Developer on $1 Billion Trump Plaza in Jeddah
Manhattan Sees Surge in Office-to-Housing Conversions, Highest Since 2008
Switzerland and U.S. Issue Joint Assurance Against Currency Manipulation
Electronic Arts to Be Taken Private in Historic $55 Billion Buyout
Thomas Jacob Sanford Named as Suspect in Deadly Michigan Church Shooting and Arson
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
New York Man Arrested After On-Air Confession to 2017 Parents’ Murders
U.S. Defense Chief Orders Sudden Summit of Hundreds of Generals and Admirals
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
Trump Claims FBI Planted 274 Agents at Capitol Riot, Citing Unverified Reports
India: Internet Suspended in Bareilly Amid Communal Clashes Between Muslims and Hindus
Supreme Court Extends Freeze on Nearly $5 Billion in U.S. Foreign Aid at Trump’s Request
Archaeologists Recover Statues and Temples from 2,000-Year-Old Sunken City off Alexandria
China Deploys 2,000 Workers to Spain to Build Major EV Battery Factory, Raising European Dependence
Speed Takes Over: How Drive-Through Coffee Chains Are Rewriting U.S. Coffee Culture
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Ringo Starr Champions Enduring Beatles Legacy While Debuting Las Vegas Art Show
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Colombian President Petro Vows to Mobilize Volunteers for Gaza and Joins List of Fighters
FBI Removes Agents Who Kneeled at 2020 Protest, Citing Breach of Professional Conduct
Trump Alleges ‘Triple Sabotage’ at United Nations After Escalator and Teleprompter Failures
Shock in France: 5 Years in Prison for Former President Nicolas Sarkozy
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
BNP Paribas Abandons Ban on 'Controversial Weapons' Financing Amid Europe’s Defence Push
Typhoon Ragasa Leaves Trail of Destruction Across East Asia Before Making Landfall in China
The Personality Rights Challenge in India’s AI Era
Big Banks Rebuild in Hong Kong as Deal Volume Surges
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Arnault Denounces Proposed Wealth Tax as Threat to French Economy
Study Finds No Safe Level of Alcohol for Dementia Risk
Denmark Investigates Drone Incursion, Does Not Rule Out Russian Involvement
Lilly CEO Warns UK Is ‘Worst Country in Europe’ for Drug Prices, Pulls Back Investment
Nigel Farage Emerges as Central Force in British Politics with Reform UK Surge
Disney Reinstates ‘Jimmy Kimmel Live!’ after Six-Day Suspension over Charlie Kirk Comments
U.S. Prosecutors Move to Break Up Google’s Advertising Monopoly
×