Birthday Bust: America’s 250th Celebration Soured by Trump’s Inflation

Birthday Bust: America’s 250th Celebration Soured by Trump’s Inflation

Data shows soaring prices coupled with limited growth spoil summer fun for working families 

Today’s Personal Consumption Expenditure (PCE) report from the Bureau of Economic Analysis (BEA) shows that the PCE Price Index climbed to 4.1% between May 2025 and May 2026, the highest in three years. The BEA also released its final estimate of GDP growth for the first quarter of 2026, which came in at 2.1%. Combined with the economy’s weak 0.5% growth rate in the fourth quarter of 2025, GDP has averaged roughly 1.3% growth over the past six months.

The economic damage from Trump’s war in Iran will continue to linger, even as fragile peace talks take hold. Higher energy and transportation costs are already working their way through the economy, raising prices for households and businesses alike. The Federal Reserve raised its 2026 inflation projection from 2.7% to 3.6% and trimmed its forecast for economic growth. That combination of higher prices and slower growth is the textbook definition of stagflation.

Groundwork’s Chief of Policy and Advocacy Alex Jacquez released the following statement:

“The president’s war in Iran has ground our economy to a halt. Business owners and workers alike are buckling under the weight of high costs and stifled growth. Working families are feeling the pinch of Trump’s economy most – prices on everyday essentials continue rising, and paychecks aren’t going as far as they used to. Our country should be celebrating our 250th birthday. Instead, Americans are struggling just to make ends meet.”

Background

Trump’s policies at home and abroad continue to make everyday necessities more expensive. PCE inflation rose 0.4% in May and 4.1% over the past year, more than twice the Federal Reserve’s 2% target.

• Energy prices drove the spike. Gasoline and other energy goods increased 6.5% in May, as Trump’s war in Iran pushed the national average price of gasoline above $4 per gallon in May, forcing families to pay more at the pump and raising prices throughout the economy.

Inflation is continuing to eat away at workers’ paychecks. 

• Paychecks are barely keeping up with rising prices. Disposable personal income increased 0.7% in May, but after a year in which prices climbed 4.1%, real disposable income has risen just 0.02%, eroding working families’ purchasing power.
• Many households are saving less to cover the basics. The personal savings rate fell to 3.0% in May, hovering near a four-year low as households continue to struggle against rising prices.

The GDP report paints a more troubling picture than the headline number suggests.

• Real final sales to private domestic purchasers, the part of the economy that reflects growth among households and businesses, was revised down to 1.7%, a roughly 29% reduction from the previous estimate.
• Recent growth has been driven by AI and data center investment rather than broad-based economic strength. Those investments are boosting output even as much of the economy remains sluggish. The clearest sign is consumer spending on services, a large component of GDP, which grew just 0.5%, down from 2.7% in the fourth quarter of 2025 and 3.6% in the third quarter, a sign that activity in the broader economy is losing momentum.
• The housing market continues to weaken, with residential investment falling 7.8% in the first quarter. Housing starts decreased 15.4% in May, down nearly 9% from a year ago and the fewest units since May 2020. Housing completions also fell 14.2% over the past year to their lowest level since January 2022.