Americans Worried About Rising Prices | Business
When it comes to the things that make consumers anxious, the threat of price hikes eliminates the fear of losing a paycheck.
When asked if inflation or unemployment was the most serious problem facing the nation, 75 percent of consumers chose inflation, according to University of Michigan consumer surveys in December. .
And 27 percent of households – the highest in nine years – complained that rising prices had lowered their standard of living.
For decades, the main financial threat to many families included fear of a business closing, of being fired, or of having trouble finding a good job after college.
Today, soaring energy costs, soaring food prices, sharply rising prices for new and used cars, rising monthly rents and shocking prices at the pump are all threatening to cut back. our budgets and greatly influence our daily lives.
Why inflation scares a lot
While inflation rates are far from the double-digit disaster of 1980 and 1981, consumers are often shocked today to pay more for many things they regularly buy.
Giving more money for a long list of daily expenses means you need to cut back elsewhere – or give up on something you need or would really like to do or buy.
Most people don’t feel better financially, even if they are working, if they are stressed out when buying goods or services that they could easily afford a few years ago.
Rapid inflation is something that many consumers 40 and under have never really experienced. But they get a close examination every time they go out to eat, refuel, or even consider buying new clothes to return to the office.
Peanut butter has climbed 6.8% in the past 12 months ending in November; apples, up 7.4 percent; fresh fish and seafood, up 10.6 percent; women’s dresses, up 8.6 percent; men’s suits and outerwear, up 14.1 percent, and car and truck rental rates are up 37.2 percent, according to the US Bureau of Labor Statistics.
We’ve been looking at a pretty decent price hike for the last eight months in total.
The Consumer Price Index rose 6.8% for the 12 months ending in November – the biggest jump since June 1982.
The CPI for the 12 months ending in December is expected to be released on Wednesday.
The national unemployment rate was 4.2% in November.
Inflation is called “regressive tax”
âIt’s awful if you’re a low income consumer. It’s just devastating, âsaid UM economist Richard Curtin, director of polls, in an interview with the Free Press.
Inflation, he said, is often referred to as a âregressive taxâ because it hurts the lowest income groups the most.
Low-income families, for example, are more likely to rent and experience budget shocks when rental prices rise, and they find it more difficult to cope with soaring energy costs. They don’t have a lot of extra money to cover the spikes in gas or food prices.
Higher income households, on the other hand, can often afford to simply ignore this and pay more to get what they want. Or they can stop spending on certain luxuries when hit by the shock of stickers, like outrageous lobster or steak prices.
Many young consumers tend to start in lower paying jobs and could also face greater financial challenges as prices rise, Curtin said. And while they can expect to make more money in the future, that doesn’t help much in covering higher costs now.
Of course, a lot of people are seeing increases. But the wage gains for most families will not exceed inflation.
In the year-end survey, just 15% of all consumers polled in the University of Michigan consumer surveys expected their household income to grow faster than inflation. This is the lowest figure recorded in eight years.
University of Michigan consumer surveys released days before Christmas indicated consumers were slightly more optimistic in December. But that was before the last wave of coronavirus cases fueled by the omicron variant.
The consumer sentiment index reached 70.6 in the December survey, up slightly from 67.4 in November. But it’s important to note that the key indicator was significantly lower than last year’s 80.7.
What consumers think about their finances can be critical in anticipating whether they will be willing to spend or save their money.
Why are we all so anxious
Consumers may be advised to consider how they will cover the higher prices going forward in 2022 and beyond, as these price increases are not expected to be temporary.
âThe era of low unemployment and low inflation were a very pleasant time, but those days are gone,â Curtin said.
Curtin said the surge in consumer optimism in the December survey was due to higher-than-expected income gains in 2022. But he warned those anticipated gains could be vulnerable if people end up working less. ‘hours for a while due to the spread omicron variant.
In 2022, Curtin said, the survey will closely monitor consumer reaction to inflation and what is expected to be a gradual rise in interest rates.
âThe main problem is how they are going to react to interest rates and inflation; we know both will increase, âCurtin said.
Typically, consumers have had two different types of reactions to higher prices. By the 1950s, Curtin said, consumers tended to pull out and save more money.
In the 1970s and early 1980s, many consumers increased their spending to buy ahead of future price hikes.
âThis early buying cycle is something the Fed is concerned about,â Curtin said.
The political debate is also likely to be intense.
The UM survey indicated Democrats expected much lower inflation rates than Republicans for the coming year and longer term. Additionally, the survey noted that three times as many Republicans as Democrats cited the negative impact of inflation on their finances (47 percent vs. 16 percent).
Consumer prices only rose 1.4% in the 12 months until January 2021 when President Joe Biden took office.
Inflation – and rising prices – took off in the spring, with the CPI rising 4.2% in April from a year earlier.
COVID-related closures started disrupting supply in early 2020 and we saw a persistent problem in 2021.
On top of that, Washington’s stimulus packages – including the monthly advance payments for the Child Tax Credit – have left many families with more money to spend, resulting in demand for many commodities. For many months, the ability to spend on experiences like travel and entertainment has been constrained by the pandemic.
Part of the upward price spiral where we are seeing increased consumer demand and supply lag can be blamed on the pandemic. And the virus itself will continue to play a role in the global economy and influence prices.
Economists remain concerned that if the pandemic is not brought under control, many people will continue to stay out of the workforce, contributing to a shortage of workers and rising costs.
The Federal Reserve is under increasing pressure to ease off the gas by raising interest rates to slow inflation. Many economists expect the Fed to hike short-term interest rates three times in 2022.
Some expect rate hikes to start in the second quarter of 2022, either end of April or mid-June. But lately we’ve been hearing some say that the first in a series of small rate hikes could take place at the two-day Fed meeting on March 15-16.