Inflation seems stubborn, but people keep spending. What's going on?

Consumer sentiment has plateaued and pump prices are inching higher, but economists and Wall Street remain broadly optimistic. Here’s why.

What’s consumers’ relationship with the economy these days? It’s complicated.

As last year drew to a close, inflation appeared to be heading decisively downward, consumer confidence was shooting higher, and many Americans’ wages were finally outpacing price increases. In the early months of 2024, those trends have been a little harder to see, at least on the surface.

The annual inflation rate has bounced around north of 3% for months, the latest retail sales data came in soft, and wholesale prices took an unexpectedly higher leap. None of that has much rattled markets, where investors remain confident that the Federal Reserve will begin lowering interest rates this year, even if later than initially hoped — a long-awaited sign that the central bank’s crusade against inflation is finally coming to a victorious end.

But we aren’t there yet, and the Fed seems likely to reinforce that message when it meets again next week to plot its path forward. In the meantime, consumers continue to grumble about persistently high prices for everything from houses to burgers. Here’s what economists say the latest batch of indicators adds up to, and where it points in the weeks to come.

About two-thirds of the recent jump in wholesale inflation came from a surge in goods prices that federal economists largely traced to rising energy costs. That includes gasoline, which jumped 6.8% in the wholesale market last month.

https://www.nbcnews.com/business/economy/inflation-retail-sales-consumer-sentiment-rcna143410

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