Last week’s political blowout is still echoing through the land. Voters made it clear they wanted a change and now the challenge is to do just that — to wave a wand and make Americans’ lives more affordable and secure.
It’s not that easy, of course, and progress will be measured in tiny increments for the next two years.
As the still shiny new era gets underway, the October consumer price index is due tomorrow and is expected to increase about 0.3 percent, compared with a 0.6 percent gain in September. Inflation is expected to hit 3.9 percent from 3.7 percent in September. Remember that these new measurements will be for October, the month before the election.
Inflation is what’s making it harder to keep the household budget in line and also plays a big part in consumer confidence. The persistent price increases for everything from groceries to gas have been uncomfortable for consumers, who continue to be worried about the cost of living, according to several indexes.
Unlike some periods of economic turbulence, the rich are feeling the pinch more than lower-income groups, according to Joanne Hsu, director of the University of Michigan consumer sentiment index. She said those with larger stock portfolios are feeling worse about the economy than those of more modest means.
"While sentiment lifted for lower- and middle-wealth consumers, it fell 5% for those with the largest stock portfolios in the wake of a relatively turbulent period in stock markets," Hsu said, according to Reuters. "Moreover, consumers' comments revealed growing anxiety over a possible AI bubble."
It’s nearly always about oil
There’s no one reason for economic twists and turns but oil usually plays a role. Although Brent crude prices have declined more than 16 percent in recent weeks drivers haven’t seen any major reset at the pump.
“Oil doesn't have to be at $117 to be expensive, and a fall to $93 doesn't mean the underlying problems have disappeared.” Rystad analyst Janiv Shah told Reuters. He said the market was still waiting for evidence of a firm agreement on Iran.
The average price was at $4.02 a gallon yesterday. That’s down 34 cents from a month earlier but still 95 cents above last year at this time. It could slip below $4 this week but don’t bet the lease renewal on it.
Electricity and other household energy bills, like natural gas, don’t slavishly follow crude prices either. The high energy needs of the unpopular data centers being built across the land are being blamed for stubborn utility bills and that emotion may drive political efforts to slow construction of new centers.
The suddenly shaky finances of Big Tech’s all-out drive to blanket the country with data centers aren’t helping. Voters showed themselves last week to be fed up with data centers and to be questioning whether artificial intelligence is really going to be the bonanza that its developers think. That doubt is no doubt influencing investors’ sudden pullback on tech stocks.
The combination heightens fears of an AI bubble. While it hasn’t yet burst, it is starting to show signs of leakage.
Nobel Prize-winning Paul Krugman cites reports of uneasiness about AI’s prospects in a Substack column.
“If these skeptics are right, we should expect that there will be a Wile E. Coyote moment: the investors and lenders who have been backing AI companies look down, realize that they have run off the edge of a cliff, and the boom plunges to the ground,” Krugman cautions.
“Such sudden reckonings have happened many times in the past, notably with the bursting of the dot-com bubble in 2000 and the bursting of the housing bubble a few years later,” he said.