The U.S. has the steepest inflation in the G7
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Disinflation is the macroeconomic word of the day. Farming is another word. Artificial intelligence are two more. From American Public Media, this is Marketplace. In Los Angeles, I'm Kyle Risdell. It is Wednesday. Today, this one is the 15th of July. Good as it always is to have you along, everybody. It's helpful, I think, every now and then to step back and take stock, see where things stand. And where things stand in this economy right now, I should be clear, is that inflation has cooled just a bit. We saw the CPI yesterday and it was a similar story today for wholesalers. Headline producer prices fell three tenths percent in June. That is month to month, which is, you know, good for anybody who buys stuff.
But step back a little bit more and you'll notice that compared to other developed economies, U.S. inflation beats them all. Highest in the G7. That's Japan and France, the U.K., Canada, Italy and Germany. Now, why?
Here's Marketplace's Subri Benishwar. Over in Germany, inflation is about two and a half percent. In Japan, it's just one and a half percent. And here in the good old U.S. of A, we are stuck with three and a half percent. Why are we like this? One reason is that we did it to ourselves.
One force that is pushing inflation up here, of course, is the tariff situation or has been.
Stephen Stanley is chief U.S. economist for Santander. But tariffs are kind of done, you know, like they happen. They're here. They're probably not going up much more, although who knows. So there's more going on that's making American inflation worse.
What it comes down to, I think, is that the U.S. economy is is just much stronger. We're running hotter than many other countries.
Inflation usually is what you get when an economy is overheating in some way. And for the U.S., one fuel feeding the fire is AI. Stephen Juno is a senior U.S.
economist at B of A. AI has driven a lot of CapEx.
CapEx, as in capital expenditure, as in tech companies, have been spending a lot, an estimated $800 billion this year in the U.S.
That CapEx has also led to upper pressure on prices for certain consumer products. Think about your computers, right? You're paying more for RAM. Think about anything that has a GPU in it. There's upward pressure.
Also, AI has driven up the stock market so people with stocks feel better about spending and you just get more pressure on prices. Bottom line, we've got more inflation for the same reason we have got strong economic growth. So thanks, AI. But also, inflation sucks. And there's a big old catch here.
The growth is fairly concentrated.
Christopher Hodge is head economist at Natixis CIB.
consumer durable goods purchases, residential construction, commercial construction, that's all lagging.
That could help control prices over the rest of the summer.
So if I look further at the horizon, it's hard for me to see what's going to accelerate
That is, of course, the hope. In New York, I'm Sabri Beneshour for Marketplace.
All that AI spending, more on that in a second. Wall Street midweek traders are just keeping their heads down and buying. We will have the details when we do the numbers.
We got the latest beige book today, the Fed's anecdotal account of this economy, always full of memorable tidbits, including this one today.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:00–7:44
2
Why is U.S. inflation still the highest in the G7 despite recent cooling?
7:44–12:05
3
How much do tariffs and trade policy contribute to current U.S. inflation?
12:05–15:18
4
How is AI-driven capital expenditure (CapEx) fueling inflation and supply pressure?
15:18–22:38
5
What is the Federal Reserve’s Beige Book and why does 'soft' anecdotal data matter now?
22:38–28:01