US economic growth is picking up again after a slowdown towards the end of 2025. According to price data released on May 28, US GDP grew by 1.6% year-on-year in the first quarter of 2026. This is despite energy prices rising and consumer confidence falling since the US president, Donald Trump, went to war with Iran in February.

Confronted by higher prices for gasoline and a range of other everyday products, US households are spending more in total, rather than cutting back on their purchases. This defies the many economic forecasters who expected that paying more for the basics would discourage consumers from spending money on less essential items, holding back expenditure and GDP growth overall.

Kevin Hassett, the director of the US National Economic Council, has hailed the rise in consumer spending – and the associated surge in borrowing – as signs of an economic boom. It seems hard to argue that people are better off if they are having to pay more for the same goods and services as before, and are taking on more short-term debt to fund the extra spending.

Hassett is statistically correct, however. If people pay more for everything, and the........

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