Inflation is falling, but it is certainly not low. April’s consumer price index, which came out on Wednesday, showed prices rose 0.3% overall from the previous month, a notable pullback from the blistering pace of 1.2% in March.
The inflation rate may have peaked — consumer prices rose 8.3% year over year in April, compared to an 8.5% annual increase in March. But the April rate is still near a 40-year high. And consumers are wary of the price increases they have seen, while expecting others.
The inflation rate may be plateauing, but Americans’ inflation anxiety has intensified.
Jeff Jones, editor at Gallup, cited the company’s latest opinion poll.
“The biggest financial problem facing their family – they say, inflation by a wide margin. Thirty-two percent say inflation is the biggest financial problem facing the country. is up from 8% a year ago,” Jones said.
After months of sharply rising prices, higher inflation expectations are setting in. The latest survey from the Federal Reserve Bank of New York found that consumers expect inflation to still be above 6% a year from now.
“The pressure felt by consumers seems to be quite consistent and quite high,” said Chris Jackson, senior vice president at polling firm Ipsos.
“People continue to expect price increases at least in the near future. And maybe they are right, and maybe they are wrong. Americans are not economists. just what’s in front of them and expect it to continue,” Jackson said.
Many economists expect inflation to remain at or near current levels, at least until the fall, as disruptions to global trade and energy supplies continue – created in large part by the COVID outbreak in China and Russia’s war in Ukraine.
Jay Hatfield is Chief Investment Officer at Infrastructure Capital Management. He predicts that oil prices in particular will remain very high, leading to persistently high prices for a wide range of goods and services.
“They drive up food prices because natural gas accounts for more than 50% of fertilizer value added, and oil and gas prices drive up transportation costs, which include air fares. Airline fares rose nearly 18% in the month, which is the biggest increase ever,” Hatfield said.
High-income consumers are expressing the most concern about inflation right now.
According to the Gallup report: “Inflation is the top concern this year among Americans of all income groups, but it is mentioned more often by high-income households (37%) than by middle-income households ( 32%) or low income (27%). %).”
But it is middle- and low-income families who are most vulnerable to continued high inflation, as their monthly expenses for food, gas and rent increase and they deplete their remaining government assistance money and savings. to pay them.
“What we’re seeing now is really in many ways a triple threat,” said Glenn Williams, CEO of financial services firm Primerica, which surveys middle-income consumers every quarter.
“We are seeing extraordinarily rapid price increases in the basics of life. Household incomes and individual incomes in the middle market are not keeping pace,” Williams said.
Meanwhile, employees are returning to their workplaces in increasing numbers, “probably adding to their travel costs, the cost of gas and other expenses related to what they need to work. dress, what they eat and where they eat,” Williams said. .
Consumers are starting to change the way they spend, said Spencer Baird, interim CEO of data analytics firm Inmar Intelligence. He said they were more methodical and price-conscious.
“Fifty-four percent of shoppers currently say they try different brands and different retail stores,” Baird said.
Consumer spending hasn’t come down yet, but Chris Jackson said given their levels of anxiety, people might start to back out of certain things.
“Things that are relatively easy discretionary purchases — going out to eat, socializing with friends, things like replacing a car or an appliance in your home,” Jackson said.
This kind of pullback in consumer spending would impact retailers, consumer products companies and, ultimately, their employees.
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