Core inflation in the US “fell to 1.5% on a three-month basis and 1.9% on a six-month basis. This is the second consecutive month that core inflation has been below 2% on a six-month basis,” Brainard said.
Brainard delivered her summary of the US economy on January 26, 2024. Contrary to forecasts made a year ago, which predicted a contraction of the US economy in 2023 and an increase in unemployment, the actual result proved the opposite. The economy grew at over 3% and the unemployment rate remained below 4% throughout the year, while inflation fell.
The overall price index for personal consumption expenditure rose 2% for the month, reflecting the rise in the core index that excludes food and energy costs. Both figures corresponded to the estimated values. On an annual basis, the overall index remained stable at 2.6%, while the core index fell to 2.9% from 3.2% in November.
The rise in the core index marked the slowest increase since spring 2021. Fed officials often refer to the core index as their primary measure of inflation.
Meanwhile, personal income posted modest growth of 0.3% in December, accompanied by a sharp 0.7% increase in spending.
Notably, economic growth exceeded the Congressional Budget Office's (CBO) February 2021 forecast, which was made before the American Rescue Plan. GDP is now more than 8.2% above pre-pandemic levels, outpacing the growth of all other G-7 economies.
One of the reasons the economy outperformed forecasts is the unexpected expansion of the labor supply. Compared to the CBO forecast before the American Rescue Plan, the workforce has grown to 167.8 million, and nearly 3 million more Americans are now employed.
Household wages and salaries have outpaced price growth by $3,500 since the start of the Biden administration, according to the latest Consumer Finance Survey. The survey shows historic gains in wealth while declines in credit card debt and student loan balances.”
Brainard concluded that the U.S. economy ended the year in a “healthy position” and entered 2024 “stronger than forecast.”
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