US consumers continue to struggle as inflation remains high

New data released from the United States show that consumers there are still feeling the pinch of persistently high prices, even as some measures of inflation remain steady. According to the latest figures from the Federal Reserve’s preferred gauge — the Personal Consumption Expenditures Price Index (PCE-Price Index) — inflation rose at an annual rate of 2.8% in September, up slightly from 2.7% in August.

When excluding volatile components such as food and energy, the “core” inflation rate also stood at 2.8% in September, down a notch from 2.9% the previous month. 

Although the overall numbers were in line with forecasts, the cost of many everyday items remains elevated, with prices for durable goods — including cars, appliances and furniture — climbing 1.4% compared with the same period last year.

In separate consumer-confidence data, the University of Michigan reported a slight rebound in its monthly sentiment survey: the index moved up to 53.3 in December from 51.0 in November.

But the modest uptick obscures deeper unease. Despite better sentiment over the near term, Americans remain pessimistic about their longer-term financial prospects. Expectations for future personal income remain weaker than at the start of 2025, and consumer optimism is dampened by a lackluster labor market and concerns about job security.

The mixed readings come at a critical moment — this is the last major inflation snapshot before the Federal Reserve is scheduled to make a decision on interest rates. Market watchers believe a rate cut is likely, given recent signs of softness in employment and consumer activity; however, the central bank will be wary of cutting too soon, given the risk that continued price pressures could revive inflation.

Economists such as Gregory Daco of consulting firm EY-Parthenon warn that pass-through from tariffs on imported goods may exacerbate affordability problems over the coming months. Many firms had absorbed rising costs for now, but with tariffs and supply-chain pressures mounting, consumers may face further pinch heading into 2026. 

In sum, despite a small lift in consumer morale, American households remain under strain: high prices, worry over jobs and tepid income expectations combine to paint a cautious, uneasy picture. With the Fed poised to act soon, all eyes will be on how monetary-policy decisions respond to a climate where inflation remains sticky and consumers remain under pressure.