An eye-watering 49 percent of Americans say rising inflation under Joe Biden is eroding their living standards.
“After stabilizing earlier this year, concerns about inflation have grown again,” reads the University of Michigan Surveys of Consumers report.
The survey shows that almost half of those polled in early October say high prices were eroding their living standards.
That number is up from last month’s 39 percent, matching the all-time high notched in July 2022.
The Epoch Times reports:
Inflation, as measured by the Consumer Price Index (CPI), shot up at a furious pace through 2021 and narrowly missed breaking through the 10 percent psychological barrier by mid-2022.
The pace of rising prices hit a recent peak of 9 percent in June 2022, a multi-decade high that later fell to 3.1 percent by June 2023—but it has jumped back up to 3.7 percent, bringing with it renewed concerns about inflation.
In addition to a record share of consumers saying that high prices are undercutting their standard of living, the year-ahead inflation expectations jumped from 3.2 percent last month to 3.8 percent in October.
Longer-term inflation expectations also rose, climbing from 2.8 percent last month to 3.0 percent this month.
Prior to the pandemic, long-run inflation expectations were within the 2.2-2.6 percent range, with the latest data reinforcing the view that consumers think higher levels of inflation are more or less baked into the economy and price pressures will persist for longer.
“Stagflation with unanchored inflation expectations are a real problem for the Fed. Risk off as the markets need to price out cuts again and deal with higher for longer,” said macro advisor Craig Shapiro, in a post on X.
From Umich report— Craig Shapiro (@ces921) October 13, 2023
"After stabilizing earlier this year, concerns about inflation have grown again. About 49% of consumers reported that high prices are eroding their living standards, up substantially from 39% last month and matching the all-time high last record in July 2022."… pic.twitter.com/6oa5IMN5QZ
Stagflation is a combination of sluggish growth and high inflation, a situation of major concern for the economy.
Faced with soaring inflation, the Federal Reserve has hiked interest rates at a quick pace, from near zero in March 2022 to within the current range of 5.25–5.5 percent.
Even though stresses are showing up from the rapid rate hikes—in places like banking activity and the housing market—Fed officials have warned of more interest rate increases to come if inflation data doesn’t improve.
The latest data from the University of Michigan suggests inflationary pressures have not been tamed, and the Fed has more work to do, which means potentially more rate hikes that will have a dampening effect on the economy—and consumers.
The University of Michigan survey also showed that overall consumer sentiment plunged 7 percent in October after two months of relatively little change.
“Assessments of personal finances declined about 15 percent, primarily on a substantial increase in concerns over inflation, and one-year expected business conditions plunged about 19 percent,” said University of Michigan Surveys of Consumers Director Joanne Hsu, in a statement.
The numbers from the closely-watched University of Michigan survey dovetail with other recent reports that suggest the U.S. consumer is on an increasingly wobbly footing.
A recent report from the Federal Reserve Bank of New York showed that U.S. households reported being financially worse off in September than they were a year ago.
Also, like the University of Michigan survey, the New York Fed data shows that future inflation expectations have gone up. In September, one-year-ahead consumer inflation expectations rose to 3.7 percent, up from 3.6 percent in the prior month.
In particular, households expect to pay more for food, with their year-ahead projections growing to 5.6 percent from 5.3 percent.
Another report saw consumer confidence fall for the second consecutive month to a four-month low in September, according to the Conference Board.
Expectations about the economic outlook over the next six months dropped below the Conference Board’s recession threshold of 80, reflecting waning confidence about business conditions, job availability, and earnings.
“Write-in responses showed that consumers continued to be preoccupied with rising prices in general and for groceries and gasoline in particular. Consumers also expressed concerns about the political situation and higher interest rates,” Dana Peterson, chief economist at the Conference Board, said in a statement.
The decline in consumer confidence dovetails with recent remarks made by former Walmart CEO Bill Simon, who told CNBC in an interview on Oct. 9 that a series of factors—political polarization, inflation, and high interest rates—were all working together to undermine consumers and their propensity to spend.
“That sort of pileup wears on the consumer and makes them wary,” Mr. Simon told the outlet. “For the first time in a long time, there’s a reason for the consumer to pause.”
Consumer spending is a major driver of the U.S. economy, accounting for roughly two-thirds of gross domestic product.