Trump’s Economic Scorecard: Higher Inflation, Flat Wages And A Ballooning Federal Deficit
In the past few days, new economic reports have come out that don’t paint a very rosy picture for a number of economic items. While GDP hit 4.1% for the June quarter, but only 2.9% year over year, and the unemployment rate is hovering at all-time lows, inflation continues to increase, real wages are stagnant and the federal budget deficit is ballooning .
The following reports on inflation and wages could be a couple of the reasons that many American workers are not feeling better about their financial situation. And add to those concerns about Trump’s tariffs, especially as it applies to products such as soybeans. To get an overview of economic data while Trump has been President check out “Trump’s Economic Scorecard: 18 Months Into His Presidency.”
Inflation continues to creep up
One impact from the CPI and PPI inflation reports this past week should reinforce the willingness of the Federal Reserve to raise its target interest rates in September and if inflation remains at these levels to do so again in December and in 2019.
Also, keep in mind that the inflationary impacts of Trump’s tariffs have not fully made their way into prices. As businesses costs increase a significant portion will be passed onto consumers.
For July the CPI, or Consumer Price Index, rose at a 2.9% rate which matches last months increase. This is close to double the 1.6% rate when Trump was elected and up from the 2.1% increase in December 2016, the month before he entered office.
The Core CPI, which excludes food and energy, increased from 2.3% year over year for June to 2.4% in July. This is the highest Core CPI in over 10 years. The Fed is anticipating that the Core rate will level off soon per Capital Economics, but Capital Economics forecasts that, “core inflation will continue to trend higher.”
The Producer Price Index, or PPI, has risen over a full percentage point over the past year from 2.0% in July 2017 to 3.3% this year. The Core PPI, without food and energy, has risen almost a full percentage point from 2.0% to 2.8%. Typically the PPI leads the CPI as businesses should eventually pass at least some of their higher costs onto consumers.
Real wages are essentially flat in the past year
As inflation increases it puts a damper on wages. While average hourly earnings have increased from $26.34 per hour to $27.05, or 2.7% over the past year, inflation at 2.9% has actually lead to real wages falling a small amount from $10.78 per hour a year ago to $10.76 in July this year.
Federal deficit is ballooning
The U.S. Treasury published its July Monthly Treasury Statement and it showed that the first 10 months of fiscal 2018’s deficit of $$684 billion has surpassed all of fiscal 2017’s deficit of $666 billion. One of the downsides of Trump’s tax cuts is its impact on the Federal deficit as it is projected to increase to $1 trillion in fiscal 2020 per the Congressional Budget Office.