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Warning signal for the U.S. economy from growth, inflation, and real estate

A three-year record for inflation, which climbed to 3.8% — along with new data on disposable income and a downward revision of GDP — contradicts the White House’s optimism

Newsroom May 28 10:57

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Inflation, growth, real estate… The data released in the United States today show that the world’s largest economy is less robust than President Donald Trump regularly claims.

Within just a few hours, several official statistics painted a gloomy picture, just months ahead of the November midterm elections.

GDP growth for the first quarter was revised downward to an annualized 1.6%, from a previous estimate of 2%. This means it is far from the 4–6% target by year’s end that the White House had hoped for, based on a recent forecast by Trump adviser Kevin Hassett.

The BEA statistical agency also estimates that consumer spending and investment in the first quarter had been overestimated.

One of the two inflation indicators, the PCE (Personal Consumption Expenditures Price Index), also released by the BEA, confirms that prices rose in April at a pace not seen in nearly three years (3.8% year-on-year). This is mainly due to a surge in fuel prices following the start of the war in Iran.

The BEA report also shows that Americans’ disposable income is declining, as wages are not increasing as fast as inflation. The savings rate fell to 2.6%, from 3.2% in March.

“Oops,” commented economist Heather Long of Navy Federal Credit Union on X. “This shows how strained Americans’ finances currently are,” she added, noting that the situation is not “sustainable.”

No relief comes from the labor market either, where hiring and wage growth remain stagnant, economist Gregory Daco noted. He explained that the economy is being supported by three pillars: affluent consumers, investment in artificial intelligence, and rising financial asset values. “These pillars obscure the fact that the foundations of the economy are becoming increasingly fragile,” he added, pointing to weak consumption growth and a sluggish housing market.

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Based on additional data released today, sales of new homes fell in April, disappointing White House expectations for growth.

“Prospective buyers are simultaneously facing rising property prices, higher interest rates, and declining purchasing power,” said economist Yelena Maleyev of consulting firm KPMG.

Thirty-year mortgages, the most popular in the U.S., now carry an average interest rate of 6.53%, according to mortgage agency Freddie Mac. The rate had fallen below the symbolic 6% threshold on February 26, two days before the U.S.-Israeli strikes on Iran.

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