Inflation has consumers feeling a painful pinch

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WASHINGTON — Consumers are spending more to fill their tanks, feed their families and pay the rent. The latest government data show that inflationary pressures and a depressed job market are hurting an economy that barely grew in the first half of the year.

Higher prices could also keep the Federal Reserve from taking steps to stimulate the growth next week when policymakers meet.

When prices rise, consumers cut back on big purchases, such as appliances, furniture and vacations. Mixed reports on manufacturing Thursday and flat retail sales in August suggest that may already be happening.

A decline in demand forces businesses to put off hiring and even lay off workers. In August, the economy added zero net jobs. Unemployment benefit applications have increased in three of the past four weeks.

“Unless spirits improve soon, businesses will ramp up layoffs, consumers will pull back, and the economy will fall back into recession,” said Mark Zandi, chief economist at Moody’s Analytics.

Some inflation can be healthy for the economy because it encourages people to spend and invest rather than sitting on their cash. More spending drives corporate growth, which makes businesses more likely to hire people.

For the 12 months that ended in August, core prices surged 2 percent. That’s the biggest year-over-year increase in nearly three years, and it’s at the high end of the Federal Reserve’s informal inflation target.

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