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US Consumer Sentiment Rising: A Mixed Bag of Optimism and Uncertainty

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US Economy

Consumer confidence in the US economy has perked up, reaching a six-month high in October. The University of Michigan’s consumer sentiment index climbed to 71.5, a notable increase from September’s 68.1. This positive shift marks the highest level of consumer sentiment since April.

The surge in optimism can be largely attributed to the widespread expectation that the Federal Reserve will hold interest rates steady. Consumers seem to be breathing a sigh of relief, anticipating that borrowing costs will remain manageable. This sense of stability is likely contributing to a more positive outlook on the overall economic landscape.

Further fueling the positive sentiment is the perception that inflation has peaked. Consumers are increasingly confident that the relentless price increases of the past year are finally easing. They anticipate continued declines in inflation in the coming months, which would alleviate pressure on household budgets and contribute to a more favorable economic environment.

However, it’s important to note that this wave of optimism is happening against a backdrop of lingering economic concerns. While the recent rise in consumer sentiment is encouraging, it remains below its historical average. This suggests that consumers are still proceeding with a degree of caution, acknowledging that potential challenges could lie ahead.

One area where caution is evident is in the assessment of current economic conditions. The survey revealed a slight dip in views on this front, indicating a degree of uncertainty about the immediate state of the economy. Consumers may be grappling with mixed signals, such as a strong labor market juxtaposed with persistent inflation in certain sectors.

Adding to the sense of measured optimism, the survey also showed a slight decrease in optimism regarding the long-term economic outlook. This could stem from a variety of factors, including global economic uncertainty or domestic political concerns. The complexities of the global landscape, including geopolitical tensions and supply chain disruptions, may be weighing on consumers’ minds, leading to a more tempered outlook on the future.

In conclusion, the recent rise in consumer sentiment is a welcome development, but it’s essential to view it within a broader context of ongoing economic complexities. Consumers are cautiously optimistic, buoyed by the expectation of stable interest rates and easing inflation. However, they remain aware of lingering uncertainties, reflected in their views on current economic conditions and the long-term outlook. The coming months will reveal whether this newfound optimism can be sustained or whether it will be tempered by economic headwinds.

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Why the president must not be lexicographer-in-chief

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Who decides what legal terms mean? If it is Donald Trump, God help America

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Economics

Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

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Inflation rate slipped to 2.1% in April, lower than expected, Fed’s preferred gauge shows

Inflation barely budged in April as tariffs President Donald Trump implemented in the early part of the month had yet to show up in consumer prices, the Commerce Department reported Friday.

The personal consumption expenditures price index, the Federal Reserve’s key inflation measure, increased just 0.1% for the month, putting the annual inflation rate at 2.1%. The monthly reading was in line with the Dow Jones consensus forecast while the annual level was 0.1 percentage point lower.

Excluding food and energy, the core reading that tends to get even greater focus from Fed policymakers showed readings of 0.1% and 2.5%, against respective estimates of 0.1% and 2.6%.

Consumer spending, though, slowed sharply for the month, posting just a 0.2% increase, in line with the consensus but slower than the 0.7% rate in March. A more cautious consumer mood also was reflected in the personal savings rate, which jumped to 4.9%, up from 0.6 percentage point in March to the highest level in nearly a year.

Personal income surged 0.8%, a slight increase from the prior month but well ahead of the forecast for 0.3%.

Markets showed little reaction to the news, with stock futures continuing to point lower and Treasury yields mixed.

People shop at a grocery store in Brooklyn on May 13, 2025 in New York City.

Spencer Platt | Getty Images

Trump has been pushing the Fed to lower its key interest rate as inflation has continued to gravitate back to the central bank’s 2% target. However, policymakers have been hesitant to move as they await the longer-term impacts of the president’s trade policy.

On Thursday, Trump and Fed Chair Jerome Powell held their first face-to-face meeting since the president started his second term. However, a Fed statement indicated the future path of monetary policy was not discussed and stressed that decisions would be made free of political considerations.

Trump slapped across-the-board 10% duties on all U.S. imports, part of an effort to even out a trading landscape in which the U.S. ran a record $140.5 billion deficit in March. In addition to the general tariffs, Trump launched selective reciprocal tariffs much higher than the 10% general charge.

Since then, though, Trump has backed off the more severe tariffs in favor of a 90-day negotiating period with the affected countries. Earlier this week, an international court struck down the tariffs, saying Trump exceeded his authority and didn’t prove that national security was threatened by the trade issues.

Then in the latest installment of the drama, an appeals court allowed a White House effort for a temporary stay of the order from the U.S. Court of International Trade.

Economists worry that tariffs could spark another round of inflation, though the historical record shows that their impact is often minimal.

At their policy meeting earlier this month, Fed officials also expressed worry about potential tariff inflation, particularly at a time when concerns are rising about the labor market. Higher prices and slower economic growth can yield stagflation, a phenomenon the U.S. hasn’t seen since the early 1980s.

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German inflation May 2025

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19 May 2025, Berlin: Apricots are sold at a greengrocer for 7.98 euros per kilogram. Grapes and papaya are also on offer.

Photo by Jens Kalaene/picture alliance via Getty Images

Germany’s annual inflation hit 2.1% in May approaching the European Central Bank’s 2% target but coming in slightly hotter than analyst estimates, preliminary data from statistics office Destatis showed Friday.

The print compares with a 2.2% reading in April and with a Reuters projection of 2%.

The print is harmonized across the euro zone for comparability.

So-called core inflation, which strips out more volatile food and energy prices, dipped slightly from April’s 2.8% to 2.9% in May. The closely watched services print meanwhile eased sharply, coming in at 3.4% compared to 3.9% in the previous month.

Energy prices fell markedly for the second month in a row, tumbling by 4.6% in May.

Germany’s consumer price index has been closing in on the European Central Bank’s 2% target over recent months, in a positive signal amid ongoing uncertainty about the economic outlook for Europe’s largest economy.

Domestic and global issues have mired expectations for Germany’s financial future.

One the one hand, U.S. President Donald Trump’s tariffs could damage economic growth, given Germany’s status as an export-reliant country, though the potential impact of such duties on inflation remains unclear. But frequent policy shifts and developments have been muddying the picture.

On the other hand, Germany’s newly minted government is starting to get to work and has made the economy a top priority. Questions linger about when and to what extent the new Berlin administration’s policy plans might be realized.

The ECB is set to make its next interest rate decision on June 5, with traders last pricing in an over 96% chance of a quarter point interest rate reduction, according to LSEG data. Back in April, the central bank had cut its deposit facility rate by 25 basis points to 2.25%.

This is a breaking news story, please check back for updates.

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