Today’s GDP report came out and of course the media focused on their favorite metrics but the statement from the Bureau of Economy Analysis couldn’t have been release before President Trump released his usual social media commentary.
Actually, “Two Late” (sic) Powell could have cut rates 100 bps in September but the President who is nothing even remotely close to being an economist much less a banker doesn’t understand anything about the Fed’s transmission rate or duration.
The report was ugly enough for him to truther so let’s see why together:
That’s brutal, a 3% drop primarily attributed to 1% for the shutdown and a general slow down in economic activity across the board. This has nothing to do with the Federal Reserve and everything to do with a higher cost of living as this article will outline.
The financial media as always is selective as to what information they wish to highlight because the general idea is to promote happy happy fun fun news to keep retail motivated to put every penny they have into equities and justify their existence as casino barkers.
Unfortunately, another report is issued as the same time as GDP via the BEA and it was somewhat disturbing. The Personal Income and Outlays Report indicated just how dire of a condition the consumer was heading into year end. For example, this report on Changes in Monthly Consumer Spending should raise a few eyebrows.
So if consumer spending increased but most of it was spent on services, that begs several questions. For example as highlighted above, the CPI report via the BLS indicated declining health insurance and other medical costs yet somehow it’s the third highest expense for consumers?
Perhaps there is a tad bit of inflation lurking out there as the PCE report highlights this morning:
This just goes to justify the FOMC standing pat on interest rates as a core rate of 3.0% that should pop a tad higher as energy and the flow through of tariff price increases hit in Q1 2026 begins to body slam the consumer even harder.
Needless to say, if everything was getting more expensive the savings rate declined again as the report demonstrates.
Ouch. And when one looks a table 2.6 line 37 it doesn’t take a rocket scientist to see the personal disposable income has been stagnant since the third quarter of last year.
Perhaps all of these hits to the consumer have been too much leading into Christmas of 2025 and that’s what is keeping consumer sentiment in the proverbial doldrums. From today’s release of the University of Michigan consumer survey:
Maybe it’s not such a “golden age” after all since the so-called Liberation Day the American people were promised.
