Core inflation slows down while consumer spending remains strong

In August 2025, the United States experienced a notable trend in economic indicators, particularly concerning inflation and consumer spending. The Commerce Department reported a 0.3% increase in the personal-consumption-expenditures price index compared to the previous month, marking a rise from July’s 0.2% gain. Over the past twelve months, the index climbed 2.7%. Excluding volatile food and energy prices, core inflation rose by 0.2%, slightly down from a 0.3% increase seen in July, establishing a year-over-year core index increase of 2.9%. This indicates a relatively stable inflation environment as the Federal Reserve monitors these trends. In addition to inflation trends, consumer spending showed resilience during the same period. The Commerce Department highlighted a 0.6% rise in overall consumer spending for August, further detailed by a 0.4% rise after adjusting for inflation. Real disposable income also indicated a progressive trend, ticking up by 0.1%, continuing a modest rise across two consecutive months. It's noteworthy that despite prevailing anxieties over potential inflation increases, consumer spending remained robust, bolstered by rising wages and relatively low unemployment rates. Market sentiments reflected consumer confidence amidst increasing prices; however, consumer sentiment noted a drop to 55.1, based on a University of Michigan survey, emphasizing that 44% of respondents felt that high prices were impacting their finances negatively. Heightened fears regarding inflation, coupled with apprehensions surrounding the labor market, contributed to this decline in consumer confidence. The report also highlighted that durable goods prices fell for the second straight month, decreasing by 0.1%. Despite this, spending on durable goods remained strong, with a reported 0.9% rise after adjusting for inflation. This spending pattern showed that consumers had not significantly curtailed purchases, even with economic uncertainties stemming from tariffs announced by President Donald Trump. Overall, the interplay of inflation and consumer spending presented a complex economic landscape, demonstrating an ongoing challenge for policymakers as they navigate rising prices against a backdrop of consistent consumer behavior.