The elevated inflation rate is forcing U.S. citizens to spend hundreds of dollars a month extra than usual, forcing many into a financially tough spot as households struggle to make ends meet.
The average U.S. household in November spent $396 more a month to buy the same goods and services they purchased a year back, according to data from Moody’s Analytics. As wage growth trailed behind inflation for average workers, their paychecks were only able to afford fewer or cheaper items over the year.
The 12-month inflation came in at 7.1 percent in November, down from 9.1 in June and registering the fifth straight decline. However, inflation rates for essential commodities that the average American pays for remain elevated.
Struggling Consumers
High inflation has made life difficult for many Americans. According to a survey by retail technology platform Swiftly, 69 percent of shoppers are struggling to pay their grocery bills, with 83 percent relying on some kind of loyalty program or coupon to get enough food on the table.Elevated inflation rates have also changed consumer behavior, as 74 percent of survey respondents said they have altered grocery shopping habits in the past year, with 33 percent shopping in-store more than they used to.
Food banks are also having a tough time helping out families in need. In an interview with USA Today, San Antonio Food Bank’s president Eric Cooper said that the COVID-19 pandemic, persistent inflation, and uncertainty of the future have put pressure on families coming to the food bank, some of them seeking out help for the first time.
Future Inflation
In a recent interview with CNN, economist Mohamed El-Erian predicted inflation to be lower than what it is today by the end of 2023. However, inflation “risks getting pretty sticky” at around the 4 percent rate, he warned. This would put it double the 2 percent inflation target that the Federal Reserve has in mind.The economist also warned that manufacturing is contracting, with parts of it “already in recession.” Though the consumption of services remains healthy, the consumption of certain goods is “under pressure.”
“Inflation has likely already peaked in most markets, but reducing price pressures tied to labor markets and wage growth will take longer. As such, central banks may reasonably achieve their 2 percent inflation targets only in 2024 or 2025,” the report stated.