Understanding Stagflation Signs and Core Inflation
Stagflation Signs Continue to Dominate the Headlines
Stagflation signs resurfaced this week as economic data revealed a troubling mix of rising consumer prices and stagnant job growth, reigniting concerns about a prolonged slowdown.
As households tighten budgets and businesses brace for uncertainty because of the Trump tariff war, the fear of stagflation, something I haven’t experienced since I was in grade school, now looms over today’s economic landscape.
An appeals court has ruled that most of President Trump’s tariffs are illegal, but held off on enforcing the decision until mid-October so that the Trump administration can appeal to the Supreme Court.
That’s the good news. The bad news? The U.S. and global economies hinge on the Supreme Court. I’m not sure I feel comfortable with that thought. Of course, President Trump has been posting on Truth Social for months that if the Supreme Court doesn’t allow the tariffs, we will experience another Great Depression. Smh…
Core Inflation at Its Highest This Year
What Is Core Inflation? It measures how much prices are rising, but it excludes expenses such as food and energy costs since those costs vary and are inconsistent. But it does factor in rent, healthcare, clothing, and transportation services. But don’t get too excited. Energy costs are rising and will continue to do so because the Big Beautiful Bill decimates the solar power industry.
The Commerce Department reported that adjusted annually, core inflation is at 2.9% and up 0.1 percentage point from June, its highest annual rate since February. Core inflation allows economists and policymakers to determine if inflation is rearing its ugly head.
Stagflation Lite
I was a kid in the 1970s when the U.S. was dealing with a struggling economy and fuel shortages, but I have read into that era enough to know it wasn’t pretty. Just look up videos on the gas shortages.
Since the unprovoked tariff wars started, economists have been concerned with stagflation, which is a nasty trifecta: prices go up (inflation), jobs disappear (high unemployment), and growth stalls (the economy isn’t expanding). Where are we now?
Well, prices are going up, just check your grocery bill. The job market? Bad enough that President Trump shot the messenger and fired Dr. Erika McEntarfer, the Bureau of Labor Statistics (BLS) chief, because of a horrible jobs report. Let’s not forget how many thousands of people are getting laid off because of AI.
But, maybe Jeffrey Roach, chief economist at LPL Financial, can provide a few rays of sunshine on a cloudy financial day since he said we might experience “stagflation-lite.” Either way, we are still facing the signs of stagflation.
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