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U.S. Inflation Rates Subside
For the first time in over three and a half years, November witnessed a decline in prices across the U.S. In correlation with this, the annual inflation increment plummeted under 3%, increasing the prospects of an interest rate cut by the Federal Reserve in March of the upcoming year. A report released by the Commerce Department last Friday depicted a subsidence in underlying inflation pressures.
Impact on Household and Economy
The slackening inflation can result in an increased household income, furnishing a boost to consumer spending, thereby bolstering the economy by the end of the year. This data complements a series of recent statistics fortifying the robust nature of economic expansion, aided by a durable labor market. The economy has successfully discredited earlier predictions of recession propounded by economists and business executives since end-2022.
Inflation and Federal Reserve Outlook
According to the Bureau of Economic Analysis in the Commerce Department, the PCE (personal consumption expenditures) price index, a key measure of inflation, witnessed a decline of 0.1% last month. This reduction in the PCE price index is the first monthly deterioration since April 2020 and preceded an unchanged reading registered in October.
Consumer Spending Surge
Expected to boost spending, the rise in income available to households after accounting for inflation and taxes reflected an increase of 0.4% after an October gain of 0.3%. This allowed U.S. citizens to increase their spending at the beginning of the holiday shopping period. Occupying more than two-thirds of U.S. economic activity, consumer spending grew by 0.2% last month, a slight increase from 0.1% in October.
Future Predictions for U.S. Economy
The upward trajectory in the fourth quarter's economic performance is set to counterbalance any initial hiccups witnessed at the beginning of the quarter. With predictions for GDP (gross domestic product) growth in the fourth quarter ranging between a 1.1% annualized rate to as high as a 2.8% pace, the economy is projected to maintain the 4.9% growth rate accomplished in the third quarter.
