- U.S. inflation hit 3.5% in March, the highest in nearly three years
- Higher fuel costs are the primary driver of increased consumer prices.
- The public portion of national debt has surpassed U.S. GDP.
A handful of federal reports released Thursday that help estimate the health of the U.S. economy reflect plenty of cause for concern as consumer prices spiked amid fallout from the Iran war, the country’s national debt hit an unfortunate benchmark and overall growth in the first quarter of the year came up short of expectations.
The latest Personal Consumption Expenditure report from the Commerce Department finds overall U.S. inflation shot up 0.7% on a monthly basis in March, hitting an annual rate of 3.5%. Core PCE inflation, which strips out volatile food and energy prices rose 0.3% from February to March and came in at an annual rate of 3.2% last month.
A separate Commerce Department report published Thursday finds U.S. gross domestic product, a metric that captures the value of all goods and services produced in the country, came in at 2% for the first three months of the year. The rate is well above an anemic 0.5% reading from the final quarter of 2025 but fell short of the 2.2% most economists were expecting.
While the final quarterly GDP numbers from last year were impacted by an extended federal government shutdown, the latest GDP data got a boost from business investment in artificial intelligence even as consumer spending, the primary driver of the U.S. economy, slipped to a 1.6% growth rate, down from 1.9% last quarter.
Fuel costs continue to rise
Consumers are facing fuel costs that have risen steadily since the U.S. and Israel launched attacks on Iran in late February and those increases are beginning to trickle into higher prices for a broad array of goods.
A Thursday report from AAA finds the average price of a gallon of regular is now $4.30, $1.12 per gallon more than a year ago and the highest since July 2022. Utah drivers are facing even higher rates with the average price of a gallon of regular at $4.37 on Thursday per AAA data, $1.05 more than this time last year.
While a continuing boom in AI investment has driven U.S. investment markets into record or near-record territory in recent weeks, those gains benefit a relatively small portion of U.S. consumers. Federal Reserve data reveals that about 87% of the U.S. stock market is owned by the top 10% wealthiest Americans while the poorest 50% own just 1.1%.
“This is a split-screen economy,” Heather Long, chief economist at Navy Federal Credit Union, told CNBC. “Companies and investors involved in AI are on fire. Meanwhile, middle and moderate income households are struggling with high gas prices and inflation that’s back at the hottest level in three years.”
National debt hits crossover mark
New federal data also finds that the public portion of U.S. national debt reached $31.265 trillion as of March 31, while GDP over the preceding year was $31.216 trillion. While the national public debt mark has breached the 100% of GDP crossover point previously, the Wall Street Journal notes the debt-to-GDP ratio is economists’ preferred metric for how much the country’s borrowing weighs on the economy. As it rises, debt consumes resources that could be used more productively elsewhere.
“We’re headed toward uncharted territory,” Marc Goldwein, senior vice president of the Committee for a Responsible Federal Budget, told the Journal. “There’s no magic of 100% vs. 99%, but it’s a scary place to be.”
The U.S. government is currently spending $1.33 for every dollar it collects in revenue, according to the Journal, and the budget deficit this year is projected at $1.9 trillion.