{"id":239777,"date":"2025-10-25T11:48:15","date_gmt":"2025-10-25T11:48:15","guid":{"rendered":"https:\/\/www.newsbeep.com\/au\/239777\/"},"modified":"2025-10-25T11:48:15","modified_gmt":"2025-10-25T11:48:15","slug":"the-only-people-who-feel-good-are-making-over-200000-and-have-large-stock-portfolios","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/au\/239777\/","title":{"rendered":"The only people who feel good are \u2018making over $200,000\u2019 and \u2018have large stock portfolios\u2019"},"content":{"rendered":"\n

Inflation may be increasing at a slower pace than expected, the markets might be cheering<\/a>, and the Fed will likely soon be cutting, but Diane Swonk isn\u2019t popping Champagne.<\/p>\n

The veteran economist<\/a> says the\u00a0economy \u201clooks better than it feels\u201d because the very data used to measure it is eroding, and the illusion of resilience could shatter heading into the fourth quarter.<\/p>\n<\/p>\n

\u201cThe only groups that feel good about the economy now are making over $200,000 in the surveys and have large stock portfolios,\u201d Swonk said.<\/p>\n

September\u2019s consumer price index showed<\/a> a 0.3% monthly rise and a 3% year-over-year rate, with the core index\u2014which the Fed watches more closely than the headline\u2014rising 0.2%. Economists had expected a slightly hotter print, calling a 0.4% monthly increase in the headline CPI and a 0.3% increase in the core rate.<\/p>\n

Despite coming in below forecasts, inflation is still rising on an annual basis, with September\u2019s pace accelerating from 2.9% in August. The CPI has now climbed to its highest level since January. Inflation had cooled steadily through the spring\u2014hitting just 2.9% in May and June\u2014before reaccelerating on higher energy costs.<\/p>\n

\"\" <\/p>\n

Energy costs, again, were the main driver<\/a>, with gasoline up at 4.1%, while food prices moderated, and core inflation\u2014excluding food and energy\u2014slowed to 0.2%. Markets cheered the result as a sign that inflation remains contained, bolstering expectations for another quarter-point Fed rate cut at the FOMC meeting next week and another one in December.<\/p>\n

But Swonk, chief economist at KPMG<\/a>, sees something else: a slow-moving problem that\u2019s partly statistical, partly structural, and increasingly psychological.<\/p>\n

\u201cIt\u2019s creep instead of a surge,\u201d she said, noting that the headline number masks persistent \u201cstickiness\u201d in service-sector prices and a widening split in who\u2019s actually feeling relief.<\/p>\n

Beneath the surface, she argues, the U.S. is running on shaky footing, both economically and in terms of the quality of the data that guides policymakers.<\/p>\n

Swonk pointed out that many of the categories holding inflation steady are either insulated from tariffs or benefiting from temporary waivers: computers, smartphones, and some vehicle imports. Once those fade, \u201cgoods prices are still moving up,\u201d she said, with few signs of broad-based disinflation. Core services less shelter\u2014a metric the Fed watches closely\u2014rose about 0.4% in September, Swonk estimated, and remains more than 3% higher than a year ago, \u201cwell above anything we saw pre-pandemic.\u201d<\/p>\n

That stickiness, she warns, is amplified by a bifurcated consumer base, what some economists have called the \u201cK shaped economy<\/a>.\u201d Affluent households continue to spend freely on travel, entertainment, and premium goods, keeping service-sector inflation stubborn. Lower- and middle-income consumers, by contrast, are pushing back, trading down, stretching budgets, or delaying purchases altogether.<\/p>\n

\u201cRetailers are feeling that divide,\u201d Swonk said, describing a landscape where discount chains are seeing higher-income shoppers<\/a> while subprime delinquencies creep up<\/a> among those with thinner financial cushions.<\/p>\n

The result is a headline inflation rate that understates the pain for the median household.<\/p>\n

\u201cPeople are making tough tradeoffs in their baskets,\u201d Swonk said. \u201cThe economy looks better on paper than it feels to the majority of Americans.\u201d<\/p>\n

Swonk also believes part of that gap between reality and perception stems from the government\u2019s diminished capacity to collect and verify data. Even before the government shutdown that delayed the CPI release by nine days, the Bureau of Labor Statistics was operating with roughly 20% fewer staff than before the pandemic, Swonk said, because of DOGE budget cuts.<\/a> That means that now, more than a third of price data in the CPI is imputed\u2014estimated rather than directly observed\u2014since fewer agents are collecting prices in person.<\/p>\n

\u201cWe\u2019re comparing something that\u2019s similar in price, but it\u2019s not apples to apples,\u201d she said. \u201cYou just don\u2019t have as many people in the field taking those samples.\u201d<\/p>\n

That means official inflation readings may be smoother than the real-world volatility consumers experience, particularly for categories where local price swings or shortages matter most, such as in beef prices.<\/p>\n

For the Fed, that introduces a serious blind spot. Policymakers rely heavily on inflation data to calibrate rate cuts, and if the CPI is built on incomplete sampling, it risks reinforcing the perception that inflation is easing faster than it actually is.<\/p>\n

\u201cThese are still not completely clean numbers,\u201d Swonk cautioned. \u201cThe problem isn\u2019t the shutdown. It\u2019s the staffing shortages we had going into it.\u201d<\/p>\n

To Swonk, the slow breakdown in how we measure the economy itself is almost the bigger story than the monthly inflation. Asked if she was worried that the markets and the U.S. consumer broadly might become skeptical of the BLS, or even accuse the bureau of politicization, Swonk sighed wearily.<\/p>\n

\u201cTrust in the data has already been eroding for decades,\u201d Swonk said. \u201cNow it\u2019s accelerating.\u201d<\/p>\n

Looking forward, Swonk expects the economy to slow \u201cdramatically\u201d in the fourth quarter, a turn she says was already coming before the shutdown drained 750,000 federal paychecks from the economy. Consumer stress, rising delinquencies, and tariff pass-throughs will all collide with a fragile labor market and weaker retail season.<\/p>\n

\u201cWe\u2019re going into a very difficult holiday season,\u201d she said, noting that surveys show consumers \u201cwant cash more than anything else,\u201d a reflection of financial anxiety rather than confidence.<\/p>\n

The government\u2019s tariff waivers may soften some price increases, but she expects uneven effects across sectors. Many tariff-related price pressures \u201care still ahead of us,\u201d Swonk said.<\/p>\n

This story was originally featured on Fortune.com<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Inflation may be increasing at a slower pace than expected, the markets might be cheering, and the Fed…\n","protected":false},"author":2,"featured_media":239778,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[64,63,99,86425,30018,99902,143343,164,122841,52400],"class_list":{"0":"post-239777","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-au","9":"tag-australia","10":"tag-business","11":"tag-chief-economist","12":"tag-consumer-price-index","13":"tag-core-inflation","14":"tag-diane-swonk","15":"tag-economy","16":"tag-the-economy","17":"tag-the-fed"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/239777","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/comments?post=239777"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/posts\/239777\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media\/239778"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/media?parent=239777"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/categories?post=239777"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/au\/wp-json\/wp\/v2\/tags?post=239777"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}