Inflation and the American Household
Groceries, clothing, cars, and countless other essential and luxury items have increased in price over the past few months, putting a significant strain on the average American household. Aside from the increasing cost of living, Americans have experienced lower interest rates on savings, meaning families are being clobbered financially, which is jarring — to say the least — after a pandemic and an ongoing wage crisis.
Inflation and Consumer Price Index
According to recent consumer price index reports, prices of specific goods and services rose by 5.4% on average year over year. The ongoing price increases set current inflation rates at the highest level in 13 years.
While inflation is not a bad word, the combination of current events makes it adversarial to the average American’s financial survival. With wages failing to increase at an equivalent rate to necessary goods and services, personal purchasing power weakens, meaning there is worsening socio-economic disparity and the threat of more families falling below the poverty level.
The hard truth is families and individuals who suffered the most during the pandemic are the same people who will experience the most discomfort through the current inflationary period. Those families or individuals who rent or live in low-income housing are likely to experience disproportionate disadvantages from inflation because of missed opportunities to capitalize on home value appreciation, which is one of the few areas Americans experienced significant gains.
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Average Cost of Inflation on American Households
Because of inflation, the average American household can expect to spend an extra $175 per month. Food prices increased an average of 3.4%, and energy costs rose by nearly 24%. Families realize a need to refigure basic budgets
to combat the rising expenses, resulting in less spending on luxuries like eating out or vacations.
While the financial toll is measurable and evident, the mental health consequences are more challenging to comprehend. After more than 18 months of a pandemic, Americans were just starting to return to some semblance of normalcy only to be somewhat blindsided by rising prices, restricting their “normal” once again.
While families can expect a struggle for the next several months, most economists argue that current inflation models and predictions are temporary. The Federal Reserve even doubled down on economic speculation, explaining that the recent price increases signify that things are returning to normal and telling consumers not to worry.
The explanation for extreme inflation is the price and profit drops experienced in 2020. Rising costs are necessary to restore order and health to the economy. Unfortunately, the promise of future price drops does little to comfort current struggling families and individuals.
Despite the positive talking points from economists and financial institutions, there is still a concern about where prices will end up. While inflation is suspected of reaching its peak, there is no guarantee that all prices will fall. In some instances, the new, higher price might become the new normal.
Rising inflation is not always a bad thing, but many Americans are being left behind in the current economic climate, worse off than before. Something needs to be done, but what? While wages need to increase, there is no evidence of that happening anytime soon, which means many families will need to learn to live with the increased cost of living.
Do you have any insights into current inflation, or do you have any suggestions on policy changes? Leave a comment and keep the conversation going.