Inflation in the United States is slowing, but prices remain high, creating persistent challenges for consumers. While the economy is expanding with a lower rate of price growth and a robust job market, the overall cost of living remains elevated.
According to a recent report by Jessica Dickler for CNBC, despite a broad pullback in price increases, consumers are still facing high costs for many goods and services. Mark Hamrick, senior economic analyst at Bankrate, told CNBC that cooling inflation does not equate to a substantial reduction in prices. Elevated prices for homes, vehicles, car insurance, food, electricity, and travel mean Americans continue to struggle with affordability.
The rate of price increases for food has moderated, with “food at home” inflation near 0% for the past four months, according to recent government data. Additionally, U.S. gasoline prices fell by 3.6% from April to May, and housing inflation has decreased from its peak over a year ago. However, because price increases are merely slowing and not decreasing outright, consumers still see rising monthly costs, especially for essentials like food, utilities, and rent.
The CNBC report also mentioned that a recent Wealth Watch survey by New York Life found that 61% of Americans report spending more on groceries and dining out compared to a year ago, with costs in these categories rising by $209.45 a month on average. Additionally, 56% of adults are now spending an average of $161.45 more a month on utilities, and 48% report rent costing an average of $302.94 more a month. The survey polled 2,002 adults in late May.
The financial strain from these rising costs is evident. Donn Froshiesar, head of consumer insights at New York Life, noted the toll inflation is taking on Americans’ finances, with higher costs of living leading to lower levels of financial confidence. Charlie Wise, senior vice president at TransUnion, pointed out that consumers are paying more for everyday expenses like gas, rent, and groceries. Additionally, those using credit cards are facing higher interest rates, which increase the costs for consumers carrying a balance.
Per CNBC’s report, this financial strain has led to more consumers falling behind on their payments. Over the past year, approximately 8.9% of credit card balances have transitioned into delinquency, as reported by the New York Fed in May. Moreover, more middle-income households anticipate struggling with debt payments in the coming months.
Mark Hamrick from Bankrate highlighted that the focus has shifted from inflation to an affordability crisis. He expressed hope that if prices continue to normalize and the job market remains stable, progress could be made in improving affordability.
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