Inflation rises

No solace: Inflation rises and the economy slows as the Iran war drags on

The combination of forces bearing down on the economy spells trouble for Republicans in the midterm elections.

By Sam Sutton

Inflation is running hotter than at any point since President Donald Trump returned to office, and the economy grew at a slower pace in the first quarter than previously estimated, the latest disappointing news for the administration on the issue that’s at the top of voters’ concerns.

The Commerce Department on Thursday reported that the personal consumption expenditures index — the Federal Reserve’s preferred inflation gauge — climbed at an annual rate of 3.8 percent in April, driven by surging energy costs. The so-called core PCE, which removes volatile food and energy costs, ticked up at an annual rate of 3.3 percent. The department also downshifted its estimate for gross domestic product growth to 1.6 percent from 2 percent for the first three months of the year.

Even though the monthly inflation report was tamer than most economists assumed, “I would not take much solace from today’s result,” Omair Sharif of Inflation Insights told clients in a note. “Core inflation is likely to be firmer next month and risks to the upside from the lagged impact of the energy surge remain in place.”

The combination of forces bearing down on Trump’s economy spells trouble for Republicans in the upcoming midterms. The president’s economic approval rating is at an all-time low. Gas prices have been stuck above $4 per gallon for weeks due to the war with Iran, according to AAA. Yields on long-term government debt and mortgage rates have spiked as inflation rose — and are now being further stoked by rising energy costs and mounting piles of government debt.

The White House did not respond to a request for comment.

And while the economy remains healthy by many metrics — unemployment is low, equity markets are booming, and public companies are consistently outperforming Wall Street’s expectations — popular measures of economic sentiment have cratered. The Conference Board’s consumer confidence index dipped this week as the inflationary effects of the war took hold.

Consumer sentiment is at a record low, according to the University of Michigan’s closely watched survey, dipping even below the pits reported at the height of the pandemic and post-Covid-19 inflation.

That has provided considerable fodder for Democrats in the upcoming midterm elections.

“Americans are struggling, but Trump and Republicans in Washington can’t be bothered to help,” Rep. Brendan Boyle (D-Pa.) said after the PCE report was released. “Unless you can cut a check for his ballroom, Donald Trump clearly couldn’t care less about you.”