Inflation outlook: How consumers and tariffs are having an impact

Consumer Sentiment vs Reality - Consumer sentiment has been unreliable in predicting the economy's direction [1] - Consumers are good at judging their own finances, but pessimistic about the overall economy due to media influence [2][3] - Consumer sentiment is often influenced by political affiliation [4] - It's more reliable to observe consumer spending habits than to rely on sentiment surveys [6][7] Consumer Spending and Economic Resilience - Household consumption has been steadily increasing [7] - Big banks' earnings reports show no significant cracks in the US consumer [9] - Charge-offs at big banks were below expectations, indicating no consumer credit stress [10] - The job market is the primary driver of consumer spending [10] - The labor market is cooling, but still adding jobs at a reasonable pace [11][12] - As long as real wage growth is positive, consumption will continue to be supported [13] Inflation and Tariffs - The year-over-year CPI number of 27% is driven by a low base period in the previous year [14] - Month-over-month CPI numbers are within or below expectations [15] - Economists are finding evidence that tariffs are pushing prices up, especially in product categories dominated by imports [18][19] - Trump's tariffs might raise inflation from 27% to 35%-4% [21] - Inflation had fallen to a low of 23% earlier in the year, but is now trending in the wrong direction [24]