Consumers Faced Higher Inflation in August as Housing, Groceries Spike

 Consumer prices rose more than expected in August, mainly because of higher housing and grocery costs. The Consumer Price Index (CPI) increased 0.4% for the month, bringing the annual inflation rate to 2.9%, slightly above July’s 2.7%. This rise in essential goods means many consumers are feeling more financial pressure, especially as wage growth begins to slow down. The data suggests that the cost of living continues to climb despite earlier signs that inflation might be cooling.

The report comes just before the Federal Reserve’s meeting, where officials are expected to cut interest rates to support a softening job market. Even with slightly higher inflation, markets are predicting a quarter-point rate cut, with more cuts likely later this year. The Fed’s decisions are also playing out against a political backdrop, as President Trump has criticized Chairman Jerome Powell for keeping rates too high and is attempting to remove a Fed board member, a case now heading to the Supreme Court.

Source : https://money.usnews.com/money/personal-finance/articles/consumers-faced-higher-inflation-in-august-as-housing-groceries-spike 

Deflation in Asian Economies

 As American inflation is rising, Asian inflation (except for Japan and Bangladesh) has fallen. In fact, prices in both China and Thailand are falling, many other countries within Asia are also falling. My own personal theory going into this article was that the Tariffs are playing as a demand shock, which gives a higher amount of supply, thus making the goods less valuable. However the article contends that firms "frontloaded" shipments before tariffs were in place, where exports to America had widely increased whereas the prices increased moderately compared to G20 countries and started dipping into the negatives as of late.

The article theorizes that there were several causes to the deflationary period such as:

    1. China's overcapacity causing domestic inflation while spreading deflation to countries reliant on Chinese goods. "China’s export-price index has fallen by 15%, even as exports have risen. Although the spillovers are global, Asian economies have probably been hit hardest. Over the same period, China’s goods-trade surplus with developing countries in Asia has almost doubled."

    2. Commodity markets for fuel and food have been cooling down. "The decision of the Organization of the Petroleum Exporting Countries and its allies to ramp up drilling has kept oil prices quiescent. Meanwhile, food inflation—which has been high for years because of the war in Ukraine and damage to harvests from hot weather—has subsided."

    3. Demand within Asian countries has been weakening over time, while business cycles are not as fruitful as they had hoped.

    4. Wage growth within Asia has deaccelerated. 

The article does, however, state that the Tariffs (if they are not adjusted or repealed) will further entrench the cooling of inflation. 

Source: https://www.economist.com/finance-and-economics/2025/09/01/the-threat-of-deflation-stalks-asias-economies 

The US Factory spending $100,000 a month more due to tariffs

 This article by the BBC examines how industrial towns in the U.S. are experiencing the real effects of tariffs imposed under President Donald Trump.  It focuses on a Massachusetts town that once thrived on textile production. Trump's promise was that tariffs would protect U.S. industries from foreign competition, bring back jobs, and restore economic growth. However, this article shows that the policy has produced disappointing results. 

   Local businesses state that tariffs have raised the costs for materials and disrupted supply chains, making it more difficult to compete. Workers and factory owners voice their frustration with the new tariffs. This article shows the competing visions for America’s economic future. These tariffs appeal to the people who want to protect domestic jobs and punish foreign competitors, mostly China. However, it shows the challenges of implementing these protectionist policies in a globalized economy. For the factory owners in Massachusetts, tariffs have done nothing but harm the industry. 

Article Link: https://www.bbc.com/news/articles/c3rvdxz9589o?accountMarketingPreferences=off

Fed Signals Rate Cuts Ahead as Tariffs Shift Growth Dynamics

New York Fed President John Williams recently suggested that interest rate cuts could be on the horizon if inflation continues to cool and unemployment edges higher. Projections now show inflation dropping from around 3% this year to the Fed’s 2% target by 2027, with GDP growth forecast to slow to roughly 1.25–1.5% next year. While tariffs have added about 1–1.5% to inflation, Williams emphasized that the Fed remains “data-driven” and will adjust gradually.

This outlook highlights the balancing act facing policymakers. Rate cuts may ease borrowing costs and support growth, but the effects of tariffs, higher prices, and international trade frictions add uncertainty to the mix. With global demand uneven and job growth slowing, the Fed’s next moves could determine whether the economy maintains steady growth or risks sliding into a more prolonged slowdown.

Article: Fed's Williams sees gradual rate cuts but lets data drive when they'll happen by Michael S. Derby

Link: https://www.reuters.com/business/feds-williams-sees-gradual-rate-cuts-lets-data-drive-when-theyll-happen-2025-09-04/?utm_source=chatgpt.com

Why the private sector can’t replace U.S. government data

 A very timely discussion about why the private sector cannot collect information in the same way as the government can. This ties nicely into our discussion of perfect markets where information is necessary for the efficient functioning of markets. Private firms can and do provide some statistics, but the article argues that many area are neglected by the private market. One can classify this as an example of positive externality where a social benefit of information is greater than the private benefit to a firm generating the information. Hence, we would expect that information would be undersupplied and overpriced compared to a situation where firms could capture the externality. Perhaps that is a justification for the government to provide information.

The Myth of American Deindustrialization

Manufacturing in the United States has fluctuated in recent years, as US-based businesses moved labor-intensive manufacturing overseas.  These are profit-driven changes to produce low-cost goods for low-income households. Recently, the POTUS has debated the security behind industrial supply chains and wants to "bring factories back" to the United States. Data released by the US Bureau of Economic Analysis (BEA) estimates that by 2024, stock in US direct investment in manufacturing abroad was $1.1 trillion. While China was estimated to run at $200 billion. This is because overseas industrial operations are not included in national accounts and could be the reason why US-based workers felt these consequences more than the US stock markets. 

If we try to bring old manufacturing back to the US, it will only hurt the American people. It was a smart move for the US to abandon manufacturing when we did. As technology advanced, the employment per output shrank dramatically. During Germany's run as a top manufacturer, it only saw a rise in unemployment numbers. As higher-value goods were being produced by robots, fewer workers were needed for their skills. Will large American corporations continue production internationally, or will trade tensions bring labor-intensive manufacturing back to the United States? Who will be the most affected by these changes??

https://www.project-syndicate.org/commentary/us-manufacturing-globally-dominant-deindustrialization-a-myth-by-jorge-arbache-and-otaviano-canuto-2025-09

Wall Street sees September rate cut as sure thing — CPI inflation data will have much to say about what comes next

 Markets are bracing for September to be the month that the Fed decides to cut the interest rates after the weakest jobs data in years was reported for August. There was just a 22,000 payroll rise, and traders see a 100% chance of at least a 25-basis point cut and even some odds of a 50-basis point move. This is a signal of how quickly the opinions have shifted to the thought that the labor market might be cooling down. Fed officials are still claiming that the upcoming CPI will be crucial in determining how to adjust the pace of the cuts. Investors feel that with soft labor data and sticky service inflation, the picture and indicate a drop in interest rates.

In the longer-term tariff, related price pressures pose a key risk. More analysts warn that if more of the tariff impact filters through to consumer prices, core inflation could remain above the Fed's 2% target. This would limit how far policymakers can go. Markets have penciled in multiple cuts into 2025-2026; however, these cuts may be overly optimistic. Gradual cutting should support the equity markets in the short term, given the weak labor data and persistent inflation that will define how aggressive the Fed can be. 

https://www.msn.com/en-us/money/markets/wall-street-sees-september-rate-cut-as-sure-thing-cpi-inflation-data-will-have-much-to-say-about-what-comes-next/ar-AA1M3E6L?ocid=BingNewsSerp