Shoppers in a store ahead of the Thanksgiving holiday in Chicago, Illinois. — Reuters
WASHINGTON: Inflation has cooled down from a year ago, but that’s failing to allay the pain of Americans who are still paying up at petrol pumps and grocery aisles.
As a result, there’s a growing disconnect between policymakers, who point to cooling inflation indicators as a sign of progress, and people who are struggling to make ends meet.
Even as the Federal Reserve’s (Fed) favoured measure of price gains eases, the cost of food, petrol, car insurance and other essentials is still elevated after two years of persistent increases. The rate of core inflation stands at 4.3%.
It all points to an issue for President Joe Biden as he tries to convince voters of his economic record for his 2024 reelection bid: How the economy looks on paper isn’t matching up with what consumers are experiencing in their everyday lives.
“What they see is the milk still costs as much as it did, the petrol is still too expensive and maybe it’s from the gut that they’re making this call that they’re not happy,” said Quinnipiac University pollster Tim Malloy.
It costs US$734 more each month to buy the same goods and services as two years ago for households who earn the median income, according to Mark Zandi, chief economist of Moody’s Analytics.
Fed chairman Jerome Powell said at a press conference after last week’s Federal Open Market Committee meeting that even though households are overall in good shape thanks to a hot labour market and rising wages, surveys show consumers are dissatisfied with the economy.
“A lot of that is just people hate inflation. Hate it,” Powell said. “That causes people to say the economy is terrible, but at the same time, they’re spending money.”
Economists and the Fed tend to focus on so-called core measures of inflation, which exclude volatile items like energy and food, and which they said provide a better understanding of underlying prices.
But it’s the recent surge in petrol prices, a main driver of the latest consumer price index report, that is squeezing Angie Hines, a 45-year-old dental sales rep, from Monroeville near Pittsburgh.
With the average price for regular petrol in her area at US$3.92/4.5 litres last Friday, higher than the US average of US$3.86, according to American Automobile Association, she said she’s switched to a hybrid and stopped calling on some customers to limit the miles she drives.
As for her lifestyle, she’s shopping more at discount stores and eating out less. She jokes with her kids about how great – and free – water is for them.
But overall, she’s frustrated that her daily expenses are going up, her long-term investments like her 401(k) aren’t, and she’s facing the same tax burden as always.
“The government’s still getting their piece of the pie from me,” Hines said. “But there’s just not as much pie to give to my family.”
Rae Johnson, 38, a single parent from Milwaukee, has been forced to make some changes to offset higher prices of food and the utilities of electricity and natural gas.
Neither of those are included in the core consumer price index measurement, but both saw cost increases in August.
“I do find myself making sacrifices,” said Johnson, who uses the pronoun they. “Food and utilities are the most difficult thing right now.”
The marketing content writer can no longer afford to pay their bill for electricity and gas all at once, so they pay half at the beginning of the month and half at the end.
Johnson is also taking advantage of a monthly deal offered by a local butcher to get an assortment of pork chops, Italian sausages, chicken and ground chuck for US$20.23 – set to match the year – with the price of chicken and beef at the grocery store too high. And they’ve found ways to make extra money, including dog-sitting for friends.
Biden’s approval rating has fallen to 42% from a high of 57% at the start of his term, as he gears up for a likely rematch with Donald Trump, thanks to voters who are unhappy with inflation and his handling of the economy.
But, Jared Bernstein, chairman of the US Council of Economic Advisers, said that consumer buying power has largely increased, with inflation growing at a slower pace than the pay of low and middle-wage workers.
That, he said, is evidence that “Bidenomics” is working for Americans.
“Our work isn’t done, for sure,” Bernstein said at a White House briefing. “But wages out-pacing inflation is some of the breathing room that the President talks about.”
Still, household incomes fell in 17 states nationwide last year, including in the swing states of Michigan and Pennsylvania, according to US Census Bureau data released in September. Five states, including Florida, Alabama and Utah, saw median income levels improve. — Bloomberg
