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Prices in the U.S. have fallen for the first time in more than three years


The news about the U.S. economy keeps getting better. Today we learned that prices have actually fallen for the first time in more than three years, and that Americans have continued to spend, even with higher interest rates. To make sense of it all, NPR's David Gura joins us now. Hey, David.


CHANG: OK. So what's this latest data say?

GURA: Well, we've seen inflation slow recently. And today we learned that prices fell by 0.1% from October to November. As you mentioned, that is the first decline since April of 2020. This is according to data in what's called the personal consumption expenditures price index or the PCE index, which I know is a mouthful. It seems pretty jargony. But it is the inflation gauge that matters the most to the Federal Reserve. It's this really broad measure of inflation.


GURA: We've seen this disconnect between the economic data, which have been getting better, and how people are feeling about the economy. Surveys have shown that's starting to change. And what's notable in the data we got today is people have continued to spend. Americans are still buying stuff even though interest rates have gone up. And they've remained elevated. North of 5%. We saw that in November, Ailsa. People were still going out to dinner, and they were still taking trips.

CHANG: Woo-hoo. OK. All this sounds pretty good, right?

GURA: It is. And it's remarkable when you reflect on how much has changed since the beginning of the year, when inflation was still high, the Federal Reserve was hiking interest rates to fight it, and there was this widespread fear that the Fed would not be able to win that fight without triggering a recession. So there was all this negative sentiment about the economy and its prospects. And Mark Dizard reminds us, this has also been a really tumultuous year for markets. Dizard is the chief investment strategist in the asset management group at the firm PNC.

MARC DIZARD: You know, investors have lived through an entire lifetime in 2023, from banking failures, rate hikes, multiple labor strikes, the geopolitics, debt downgrades, possible near shutdowns.

GURA: It's a laundry list, but we are now in a very different place. And that conversation has shifted. There's a lot less talk of a potential recession and a lot more talk, Ailsa, about the Fed pulling off this so-called soft landing. There is more optimism they'll be able to get inflation down to their 2% target without a massive economic downturn.

CHANG: OK. So what led to the shift?

GURA: Well, the key moment for the economy and for markets was last week, when the Fed wrapped up its final meeting of the year. Policymakers did not raise interest rates. That was widely expected. But what was a surprise was how hopeful the Fed sounded about the economy, a kind of hopefulness from the Fed that we have not seen in a while. Policymakers shared economic projections for 2024, and they said they anticipate cutting interest rates three times in the new year. That's a real change of tack. Of course, if the Fed does that, brings interest rates down, well, borrowing would get less expensive, and that would be a big boost for the overall economy.

CHANG: So I'm curious. Like, how has Wall Street reacted so far?

GURA: Wall Street has really embraced the Fed's hopefulness about the economy, and investors are cheering on the Fed, hoping that policymakers will lower interest rates soon in the new year. The Dow Jones Industrial Average has been setting records recently. And the S&P 500, which includes 500 of the biggest and the best-known companies in the world, is also close to a new record high. It's up almost 24% this year. Looking ahead to 2024, we are seeing really optimistic forecasts this rally will continue. Professional investors are predicting we're going to see more good gains. Of course, there are no guarantees, but there is this growing sense a soft landing is likely to happen, Ailsa. And Wall Street, like the economy, is ending the year in a very good place.

CHANG: Nice. That is NPR's David Gura. Thank you, David.

GURA: Thanks, Ailsa. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

Based in New York, David Gura is a correspondent on NPR's business desk. His stories are broadcast on NPR's newsmagazines, All Things Considered, Morning Edition and Weekend Edition, and he regularly guest hosts 1A, a co-production of NPR and WAMU.