From January 2024 through September 2024 overall inflation generally declined, with the CPI declining from 3.5% in March 2024 to 2.4% in September 2024, before gradually ticking up to 3.0% in January 2025. Inflation trended downward once again as 2025 began, decreasing to 2.3% in April, but steadily increased to 3.0% in September before dropping down to 2.4% in January 2026. The spike in energy prices led to a surge in inflation in March to 3.3%, the highest level since April 2024. Core inflation, measured by stripping out the relatively volatile food and energy categories from the CPI all items index, rose from 2.5% in February 2026 to 2.6% in March, after generally declining from a 3.1% rate in August 2025. After inflation fluctuating around 2% for most of the last decade, the Federal Reserve’s inflationary goal of 2% has been elusive this decade. While it may take some time for the impact of changing energy prices and tariffs to filter through the economy, certainly the March spike in energy prices and continuing tariffs won’t make the Federal Reserve’s goal easier to achieve. The Yale Budget Lab estimated that the tariff policies in effect as of April 8 will increase prices by 0.7% if section 122 tariffs expire in July or 1.1% if section 122 tariffs are extended, assuming the tariff costs are passed through to consumers. This results in an approximate loss of $940 (section 122 tariffs expire) or $1,500 (section 122 tariffs extended) for the average household. Economic Growth Economic growth continued but slowed in 2025. The table below shows how changes in the four components of Gross Domestic Product (GDP) contributed to the change in U.S. economic growth since 2022. Economic growth is measured by changes in GDP, which is the value of goods and services produced in a given time period. After growth of 2.5 percent, 2.9 percent, and 2.8 percent in 2022, 2023, and 2024, respectively, economic growth slowed to 2.1 percent in 2025. As indicated in the chart below, personal consumption has been the key and consistent driver of economic growth. Personal consumption accounts for approximately two-thirds of Gross Domestic Product, and contributed significantly more to GDP growth than investment spending (including business investment in equipment and inventories), government spending, or net exports in every year. Contributions to Percent Change in Real Gross Domestic Product–Annualized Rate (Source: Bureau of Economic Analysis) 2022 2023 2024 2025 GDP 2.5 2.9 2.8 2.1 Personal Consumption 2.04 1.74 2.00 1.78 Investment 1.09 0.15 0.54 0.36 Government Spending -0.22 0.59 0.65 0.19 Net Exports -0.39 0.45 -0.39 -0.21 Higher income households have driven the growth in consumer spending, particularly since 2020. The graph below compares total average annual expenditures of higher income households (green line, 81st to 100th income percentile), middle income households (brown line, 41st to 60th income percentile), and lower income households (blue line, 1st to 20th income percentile) over the period 2000-2024. (2025 data is not available due to the government shutdown). Since 2020, total average expenditures for higher income households rose from $114,839 to $150,342, an increase of $35,503 or 30.9%. Total average expenditures for middle income households rose from $51,554 to $66,900, a gain of $15,346 or 29.7%. Total average expenditures for lower income households increased from $28,732 to $35,046, an increase of $6,314 or 21.9%. Expenditures were aided by a strong stock market and differential wage growth, which contributed to an evolving K-shaped economy. According to the Congressional Research Service , over the 10-year period 2014-2024, annual real wages grew from approximately $26,000 to $32,000 for workers at the 10th percentile of the wage distribution, from $52,000 to $58,000 for workers at the median, and from $122,000 to $140,000 for workers at the 90th percentile.
Central Wisconsin Report - Spring 2026
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