Financial elites are celebrating an economy "running hot," but for working Americans, that heat just means inflation is eating their paychecks and draining their savings at the fastest clip in years.
While Wall Street cheers rising consumer spending numbers, the reality on main street is that after-tax incomes went flat in August because rising prices outpaced wage gains. The same bureaucrats who caused the price crisis are now quietly rewriting the math to make their failure look like a success story.
According to Bureau of Economic Analysis data reported by Seeking Alpha, unadjusted consumer spending jumped 0.86% in August from July and 6.1% year-over-year, hitting an annual rate of $22.3 trillion. The financial press calls this "dizzying" growth and proof the economy is "running hot." But the Boston Globe buries the real story: people are spending more because things cost more, and they are draining their bank accounts to do it. The personal saving rate fell to 4.1%, its lowest level in nearly four years. Meanwhile, gasoline and energy goods now eat up 2.3% of total consumer spending, up from 1.9% before the price crisis hit.
To make the disaster look manageable, the Commerce Department just rolled out methodological changes that retroactively altered how prices are calculated back to 2021. The Globe reports that this new formula conveniently resulted in lower core inflation rates than previously reported. When the numbers make the establishment look bad, they just change the formula.
The Federal Reserve is in no rush to fix it. Fed Chair Kevin Warsh described recent rate hikes as merely removing a "dose of accommodation," and New York Fed President John C. Williams insisted there was "no need for urgency." The central bank now admits it doesn't expect to hit its 2% inflation target until 2029. With the average 30-year mortgage rate hitting 7.58% and inflation swallowing wage gains whole, the Fed is content to let the slow bleed continue while patting itself on the back for a resilient economy.
The establishment calls it a hot economy. Working Americans just call it expensive. The open question is how long they can keep spending before the savings run dry.
