US households are spending $175 more on food, fuel, and housing as prices continue to rise. Unfortunately, income has yet to keep pace with inflation.
While the government insisted that inflation rates are temporary, they have yet to go down after months of continued increases. As a result, households are buying less goods with the same money.
US Households Spending More For the Same
The United States continues to experience a rise in inflation rates. Supply shortages along with massive government spending during the pandemic led to higher prices. The US Federal Reserve initially expected a 2% inflation rate earlier this year.
However, the actual rate by August is now at 5.3%. As a result, more families are holding back on purchases or even limiting their dining out occasions.
According to Mark Zand, chief economist at Moody’s Analytics, current inflation added $175 on US household expenses. This is based on the median annual income of $70,000. “That’s the equivalent of a full grocery, electric, or cellphone bill,” he said.
Federal Reserve Insists Inflation is ‘Transitory’
Meanwhile, the Federal Reserve continues to insist that inflation remains transitory. However, it’s been at a high rate for months now, posting 30-year highs in inflation rates. In addition, it has yet to show any signs of abating.
One major factor is the disruption of US supply chains. From shipping ports to delivery, companies are having problems dealing with longer processing times, labor shortages, and higher prices.
In fact, more than 70 cargo ships are on standby near the port of Los Angeles. They are waiting for their call that allows them to unload.
Making matters worse is the trucker shortage. Lack of qualified drivers is making items such as wood and electronics even more prohibitively expensive.
US Households’ Credit Card Debt Rising
Many US households expect their credit card debt to return to pre-COVID levels. Many were able to pare down debt last year using stimulus money. It also helped that most families have nowhere to go during the early days of the pandemic.
However, with stimulus drying up and prices going higher, many experts are bracing for a surge in credit card debt. Since April, credit card balances and delinquency rates began rising. Zand said that delinquencies are up 1.54% as of September. In contrast, rates are only at 1.30%.
Expect Price Until Middle of 2022
Chuck Grom, Gordon Haskett analyst, predicted a continued rise in the cost of goods. “Price increases will continue until the middle of next year,” he said.
He referred to a PepsiCo announcement this week. The company advised consumers to expect another round of price hikes for its snack and beverage products early next year.
As a result, many US households are now reporting that they’re having trouble covering their monthly expenses. Around 26.5 households now say that it’s “very difficult” to pay for their usual expenses, which rose by 8% since August.
This is according to the October 6 survey conducted by the Census Bureau’s Household Pulse Survey.
Watch Senate Republican Leader Mitch McConnell’s October 5 speech saying that “Inflation effectively cutting Americans’ pay while Democrats plot more spending”
Do you feel the effects of inflation on your household expenses? Are you experiencing higher costs in everything from food to fuel to housing? Will inflation rates go down soon?
Let us know what you think about the continued rise in prices of goods. Share your comments below.
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