Understanding Stagflation Signs and Core Inflation: A Deep Dive

Stagflation Signs Return to the Headlines

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

The troubling mix of rising consumer prices and stagnant job growth in recent economic data constitutes clear stagflation signs, confirming fears of a prolonged economic slowdown. As households tighten budgets and businesses face uncertainty, the fear of this challenging economic environment, which hasn’t been broadly experienced since the 1970s, now looms large.

Core Inflation Hits Its Highest Rate This Year

Understanding core inflation is crucial to assessing the health of our economy. It is a measure of rising prices that excludes volatile expenses such as food and energy costs. Core inflation provides a clearer picture of underlying price trends because it factors in more consistent expenses like rent, healthcare, clothing, and transportation services.

The Commerce Department reported that, when adjusted annually, core inflation is at 2.9%, up 0.1 percentage point from June, and its highest annual rate since February. Core inflation is a critical metric that economists and policymakers use to determine if inflation is becoming deeply embedded in the economy.

For consumers, however, the exclusion of energy can be misleading. Despite the core numbers, total energy costs are a major concern for household budgets.

The Legal Uncertainty Looming Over Trade

Trade policy adds another layer of economic uncertainty. An appeals court recently ruled that most of President Trump’s tariffs are illegal, but the enforcement of the decision was delayed until mid-October to allow the administration to appeal to the Supreme Court. The ultimate decision on these tariffs is a high-stakes matter, as global economic stability hinges on the Supreme Court’s ruling.

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