Inflation Is Cooling. Why Are Americans Still Sweating?

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, Podcasts, Radio, News.

**Sarah Holder** (0:08)
This week, we got a lot of new indicators about the state of the US economy. The headline?

**Reade Pickert** (0:14)
It's doing pretty well.

**SPEAKER_4** (0:16)
Stocks rose on Wall Street after a report showed that inflation wasn't as bad as expected last month.

**SPEAKER_5** (0:22)
Consumer prices fell 0.4 percent last month from May, the biggest.

**Reade Pickert** (0:27)
So this week has been a mix of data that's been surprising and some that hasn't been so surprising.

**Sarah Holder** (0:33)
That's Reade Pickert, who leads the US economy team at Bloomberg.

**SPEAKER_6** (0:37)
Analysts were anticipating a slight rise in first-time claims for jobless benefits. Instead, the number has fallen.

**Sarah Holder** (0:43)
Inflation is cooling. Consumers are spending. The job market is showing signs of stability. But still, the vibes are off.
Consumers sentiment reached a record low in May and looked only a little better by June. An APU survey ahead of the country's 250th anniversary in July found that over 50% of Americans expected the economy to get weaker in the coming decades.

**Kathryn Anne Edwards** (1:12)
There is something particularly unsatisfying about the economy right now, even though unemployment is not that high and even though inflation is not as high as it was.

**Sarah Holder** (1:22)
Kathryn Anne Edwards is a labor economist and the host of the Optimist Economy podcast. This week, she argued in a piece for Bloomberg Opinion that one way to make sense of the gap between official data and how Americans actually experience the economy isn't to discount how people feel, but to look closer, measure more, and read between the lines.
And she says, that's becoming even more important, as the overall picture of the economy gets more complex.

**Kathryn Anne Edwards** (1:53)
We rely on statistics as economists because we're like doctors gauging the vital signs of the economy. But for people, for advocates, for those of us who in the economy who are having a hard time, it is a validation to be seen, to be able to point to a number and say, see, I told you, it's hard right now.

**Sarah Holder** (2:13)
I'm Sarah Holder, and this is The Big Take from Bloomberg News. Today on the show, we take stock of the US economy, what the official data tell us, and what other markers could reveal about Americans' financial reality.
Some of the economic data we got this week were in line with expectations. But Reade Pickert, who leads the team at Bloomberg covering the US economy, said one indicator in particular stood out.

**Reade Pickert** (2:45)
To start with the surprising side, we started our week with much better than expected inflation data. We saw consumer prices fall last month by the most since the onset of the pandemic. And we knew and expected that inflation would fall to some extent on a month-over-month basis, just because gasoline prices fall so much in June. But it was more than that. It was also when you stripped out gasoline and energy prices and food prices, you saw this so-called core gauge of inflation, which the Fed looks at as a sign of underlying inflation.
You saw that it was unchanged in the month as well.

**Sarah Holder** (3:22)
So one of the biggest headlines was that the US Consumer Price Index had fallen for the first time since 2020 Give us a little refresher. What is that index and what does that milestone really mean?

**Reade Pickert** (3:34)
Yeah, so the Consumer Price Index is one of the major indicators that we look at in terms of gauging inflation in the US.
So the Bureau of Labor Statistics looks at a basket of goods and services. And so when we think about what the last five, six years have looked like, at the beginning of the pandemic, we saw this sharp decline in prices. And that was because we saw this pullback in demand as the broader US economy and global economy shut down. But we all remember as the economy started re-opening, people started spending again, and there were all of these different supply chain snorrels, there was this massive ramp up in inflation. And while the pace of inflation has slowed a fair bit since peaking back in 2022, it's been this persistent problem where inflation has been well above the Fed's target for a long time now.

**Sarah Holder** (4:27)
So since the CPI measures that market basket of goods, when you really peak inside that basket, prices are rising at different rates.

**Reade Pickert** (4:38)
Yeah. And one one to point out, because this has come up a lot, is really how AI is playing a role in this inflation picture. So when we look at the latest CPI report, for instance, computer software prices were up more than 17 percent from a year earlier. That's the most on record. And that's really getting into this challenge that we have right now of this rush to invest in AI and how much demand is growing, but supply is struggling to keep up.