The Federal Reserve's preferred inflation measure did not move in August, holding at 3.4% — unchanged from July.
The pause does not end a downward trend on inflation that began in May, following the Iran War fuel price spike, but the Federal Reserve wants to see that number reach 2%.
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When food and gas are removed from the calculation, consumer inflation has stayed at 3% for three straight months.
Americans spent $190 billion more in August than in July, broken down as follows:
- $25 billion in non-durable goods — products consumers use and throw away
- $21 billion in gas and energy
- $21 billion more at restaurants and hotels
The only category where Americans spent less was recreation services.
Despite increased spending, the personal savings rate fell to 4.1% in August. Outside of the COVID-19 revenge spending in 2022, this is the lowest savings rate since 2008.
It is worth noting that some outlets reported the savings rate at 2.7% in June — those reports were not wrong. The Bureau of Economic Analysis conducted its annual revision last month, which pushed those rates up across the board.
Regardless, the data shows American budgets are being squeezed by inflation.
Consumer spending remains the dominant economic engine, accounting for roughly 70% of GDP. That figure has been trending down since late 2024.
At the same time, AI investment spending is trending up — but is not in a position to overtake consumer spending any time soon.
This story was reported on-air by a journalist and has been converted to this platform with the assistance of AI. Our editorial team verifies all reporting on all platforms for fairness and accuracy.
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