Consumers shouldn't expect prices to fall anytime soon, top economist warns

• CEO confidence fell sharply to 47 in Q2 2026 from 59 in Q1, with 40% of executives expecting worsening economic conditions and 31% planning workforce reductions concentrated in tech, finance, and retail sectors investing in automation
• Headline inflation is expected to peak in Q3 2026 due to tariffs and war-related shocks, then slowly decelerate but remain well above the Fed's 2% target through 2027
• Consumers are shifting spending away from big-ticket discretionary items toward necessities and cheaper alternatives, while structural pressures from aging populations, natural disasters, and housing shortages continue driving up service costs

Summary: Economist Warns of Prolonged Inflation Through 2028

Key Forecast:

Conference Board Chief Economist Dana M. Peterson warns that U.S. inflation will remain elevated well above the Federal Reserve's 2% target until at least 2028. Headline personal consumption expenditures (PCE) are expected to peak in Q3 2024, with consumer price index (CPI) figures remaining significantly above target levels through year-end.

Market Drivers:

Peterson identifies two major inflationary shocks: tariffs and geopolitical conflicts (particularly Middle East tensions), with inflation likely having peaked in Q2 2024. Supply chain strains and corporate cost pressures will force continued price pass-throughs to consumers, particularly affecting groceries, housing, utilities, healthcare, and insurance.

CEO Sentiment:

The Conference Board's CEO Confidence Index plummeted to 47 in Q2 from 59 in Q1 (below-50 indicates negative outlook). Only 15% of CEOs view the economy as improved versus six months ago, down from 39% previously. Some 40% expect further deterioration, while 31% plan workforce reductions, concentrated in tech, finance, transportation, warehousing, and retail sectors investing in AI and automation.

Consumer Impact:

Americans are shifting spending toward necessities over discretionary items and trading down to cheaper alternatives. Despite higher nominal wages compared to 2008-2020 averages, purchasing power remains constrained by rising essential costs.

Economic Outlook:

Peterson expects U.S. GDP growth of 1.5-2%, avoiding recession but representing slower expansion. She recommends monitoring jobless claims rather than stock market volatility as the key recession indicator, noting claims remain near historical lows.