Those figures reflected an economy that’s still showing decent momentum despite global trade tensions and other geopolitical turbulence. But of most interest to the US central bank could be the fact that overall inflation is still outstripping hourly wage growth, rising by 3.7% at last reading compared with a 3.1% increase in wages.
Core PCE inflation, which excludes volatile food and energy categories, rose by 3.1% year over year in September.
Investment is also continuing to flood into artificial intelligence (AI), although last week’s midterm election result sparked speculation that a new Democrat-led Congress could curb the AI boom by introducing new guardrails and increased oversight of tech companies.
For now, though, a combination of factors – the impact of the US’s tariff regime, higher oil prices from the war in Iran, and AI investment – are likely to continue putting upward pressure on headline inflation, according to Oxford Economics’ chief US economist Michael Pearce.
“The two big [factors] are the pass-through of high energy prices, particularly diesel and gasoline prices, to a range of other consumer goods and services – in particular food prices – and the impact of the AI buildout, which is pushing up electronics prices, has put upward pressure on software prices as well,” Pearce said last week.
