WASHINGTON / LONDON (IT BOLTWISE) – Despite seemingly positive economic data, economist Diane Swonk warns of a false sense of stability. While inflation is rising more slowly than expected, only the wealthy are benefiting from the current situation. The majority of consumers continue to feel the pressure of rising prices, particularly in the services sector.
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Renowned economist Diane Swonk recently pointed out the deceptive stability of the US economy. Despite an apparently positive development in inflation data, which is rising more slowly than expected, Swonk sees the situation critically. She emphasizes that the economy looks better on paper than it feels to most people. Only those with incomes over $200,000 and large stock portfolios are currently benefiting from the economic situation.
The latest Consumer Price Index (CPI) data shows an increase of 0.3% month-on-month and an annual rate of 3%. Although these figures are below the expectations of economists who had expected a stronger increase, inflation remains a problem on an annual basis. In particular, energy prices, which rose by 4.1% in September, are driving inflation, while food prices are more moderate.
Swonk, chief economist at KPMG, sees current developments as a slow but steady threat. She points out that the quality of data used to measure the economy is increasingly eroding. Many categories that keep inflation stable are either insulated from tariffs or benefit from temporary exemptions. As soon as these disappear, the prices of goods could continue to rise.
Swonk sees another problem in the unequal distribution of economic burdens. While wealthy households continue to invest in the service sector, thereby keeping inflation high in this sector, lower and middle income groups have to limit their spending. This gap creates a distorted picture of economic reality that obscures the real challenges faced by the majority of consumers.
In addition to economic inequality, Swonk criticizes inadequate data collection by the Bureau of Labor Statistics, which is operating with fewer staff due to budget cuts. This results in a significant portion of price data being estimated rather than directly collected, compromising the accuracy of inflation measurement. Swonk warns that this incomplete data could reinforce the perception that inflation is falling faster than is actually the case.
Overall, Swonk expects the economy to slow dramatically in the fourth quarter. She sees a combination of consumer stress, rising defaults and the impact of tariffs hitting a fragile labor market and a weaker retail season. The upcoming holidays could be financially challenging for many Americans as demand for cash increases, signaling financial uncertainty.
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