Panic Begins as Inflation Rises, US Economy Slows (Uncut) 03-30-2025

STAGFLATION WARNING: Panic Begins as Inflation Rises, US Economy Slows & Trade Policy Chaos Deepens

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The fears of stagflation are growing. There is recent data that was just released several days ago. It points to a slowdown in the U.S. economy at the same time as prices increase.

Once we add an aggressive tariff regime to the mix, it might be a perfect storm since there are already warning signs of a looming stagflation. So let me share the recent data with you first. There is a really good reason to be very concerned based on inflation trends, consumer spending trends, and economic performance.

We will begin with the Personal Consumption Expenditures Price Index or PCE released on March the 28th, Friday. So in February, it reads the reading increased by 0.4 percent, which may not sound like a big deal. However, this is the highest reading in 12 months and it has been on the rise for the past three months.

On a year-over-year basis, PCE jumped 2.8 percent. So to sum this up and to put this very, very simply, the downward trend in inflation that we’ve seen in official data actually appears to reverse and to now show a slow but consistent uptick. Next, what are consumers in the United States doing? Let’s look at consumption trends and sentiment data.

First, consumer sentiment. According to Bloomberg, as U.S. consumers expect prices to increase as the result of tariffs, U.S. consumer sentiment took a nosedive. U.S. consumer sentiment tumbled this month to a more than two-year low and long-term inflation expectations jumped to a 32-year high as anxiety over tariffs continued to build.

I will be releasing an entire video on Liberation Day, April the 2nd, the day when the new tariff regime goes into effect, so if you need a quick overview of what to expect, be on the lookout for that new video this week. Now, let’s take a look at the chart. As you can see here on your left-hand side, the final March sentiment index declined to 57 from 64.7 a month earlier.

It is a significant drop. Now, on your right-hand side are price expectations. What you’re seeing here means that consumers expect prices to rise at an annual rate of about 4.1 percent over the next 5 to 10 years.

So we’re talking about long-term expectations, and it goes without saying that it is very difficult to predict where we will be 5 to 10 years from now, but the reading is actually the highest since February of 1993 and above the 3.9 percent preliminary forecast. Something I found really interesting in this article that was published by Bloomberg, it says the U.S. population on both sides of the political spectrum express concerns. This isn’t just the left, but those on the right as well and those in the middle.

Overall, consumer confidence is very low across the board, and it’s actually gotten worse over time as uncertainty increased. Of course, there is this flip-flopping on tariffs, which sends mixed messages. It sends mixed signals to foreign companies and to domestic companies as well as to consumers.

So much so that there was a business surge in purchases in February and March as businesses attempted to front load before tariffs become effective on April 2, the liberation day. Now, let’s focus on consumption data. Personal consumption not adjusted for inflation slightly increased in February, the latest data available, by 0.4 percent after a steep decline of nearly 0.3 percent in January.

A decline in consumption data shows that U.S. consumers are purchasing less. The demand has been slowing, coupled with a slow, but what appears to be steady rise in prices as we just discussed. Now, let’s take a look at the GDP data.

We want GDP to increase, which would indicate growth and economic expansion, the best case scenario. What we’ve got here is something quite different. If we look at the data published by the Federal Reserve Bank of Atlanta, we see that the latest estimate shows a negative 2.8 percent decline in GDP.

Even if an alternative forecast model is used, it still results in a GDP decline of 0.5 percent. And what’s interesting, it says here that after the latest releases, the forecast was actually downgraded, which is reflective of deteriorating economic conditions. So as the result of what I showed you, we’ve gotten a slowing economy and an increase in inflation.

What does the data hint at? Well, it hints at a possibility of stagflation, and there are red flags indicating that stagflation might already be here, which also means, of course, higher inflation, lower growth, and an uptick in unemployment numbers going forward. Federal officials appear to also see an increase in risks associated with inflation and unemployment data. This chart is published by the Federal Reserve, and it shows upside-downside forecast risks.

As you can see here, the orange line, GDP growth, shows downside risks, meaning that they do expect GDP to decline, while the PCE inflation, in green, and unemployment rate, the blue line, both show increased upside risks. Again, this looks stagflationary. With there being so much uncertainty in the policies of the Trump administration, and I’m referring to trade and economic policies, of course, here, these expectations are subject to change, and they’re very, very fluid at this time.

They may change at any point. However, all signs do point to more longer-term economic pain, if you will, and that pain will likely be directly driven by a shock associated with higher tariffs. I assume that since businesses reacted to the prospect, they reacted to the mere prospect of such an aggressive tariff regime by front-loading purchases of necessary parts and materials and other goods, then it is likely that a drop in consumer demand and higher costs moving forward will actually have a substantial impact on their ability to sustain operations.

We’re not even talking about growth. We’re just talking about sustaining operations, not really hiring new people or expanding their operations. I think this is a very slippery slope, of course, as you may know from my previous videos.

After years of inflation, consumers and businesses may be very, very sensitive to more price increases if inflation continues its trend. I hope this quick video, I hope that this quick update was helpful. Please consider becoming a subscriber and supporting my work at worldaffairsandcontext.com. It is very much appreciated.

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