In August 2025, U.S. inflation rose faster than expected, mainly because of new tariffs on imported goods introduced by President Trump. These tariffs are meant to help American industries, but they’re actually making it more expensive for companies to get the products and materials they need. As a result, the cost of producing goods has gone up, pushing wholesale inflation higher by 3.3% from last year. Although consumer prices have also risen by 2.7%, things like rent and gas have stayed relatively steady, helping to keep overall household costs from rising even more. Still, since many businesses are currently covering higher costs without raising prices for customers, there’s concern that prices at stores could go up in the near future. This ongoing inflation is also causing investors to expect the Federal Reserve might cut interest rates soon, as the economy faces pressure from both financial uncertainty and political tensions.

Consumer spending in the U.S. has stayed surprisingly strong through mid-2025, even with ongoing inflation and economic uncertainty. A big reason for this is the role of higher-income households, who have kept spending at high levels. In contrast, lower-income families, who boosted their spending in 2021 and 2022 thanks to pandemic-related savings and government stimulus, have seen their spending grow much more slowly since then. Experts say this shows that growing wealth gaps are shaping how people spend their money. While lower-income households have used up much of the extra cash saved during the pandemic, wealthier groups still have the financial cushion to keep buying, which helps keep overall spending up.