American households are still shelling out large amounts of extra cash for the same items as last year as inflation hits the nation.
Despite buying the same goods and services, shoppers are spending an average of $433 more per month than in 2021.
While the numbers are down slightly from September’s $445 a month, Moody’s Analytics analysis of October data shows inflation is still stretching budgets.
According to the US Bureau of Labor Statistics (BLS), consumer prices rose 7.7 percent in October from a year ago.
The rate is down from its most recent peak of 9.1 percent in June, and the data suggest inflation may cool further in the coming months.
Many workers’ wages have not kept pace with inflation, meaning they have lost purchasing power.
After adjusting for inflation, hourly earnings fell an average of 2.8 percent through October, according to the BLS.
Although inflation was weaker than expected for October, American households are still suffering as household spending rose 7.7 percent to $433 a month over the same period last year.
The impact on households is not simple, other factors such as personal inflation rates and geography play a role in the types of goods and services an individual buys.
October’s rate, while lower than September, is still near the highest levels since the early 1980s.
The impact on households is not simple, other factors such as personal inflation rates and geography play a role in the types of goods and services an individual buys.
Bernard Yaros, an economist at Moody’s, told CNBC that “peak inflation is behind us.”
“We are seeing more signs that peak inflation is behind us, and that should provide some relief for demographics that have been disproportionately affected by uncomfortably high inflation over the past year,” he said.
‘[For example] young and rural Americans as well as those without a bachelor’s degree.’
“There is no silver bullet,” certified financial planner Joseph Burt, chairman and CEO of Certified Financial Group, told CNBC.
“These are all little decisions that add up at the end of the month,” he said.
Madeline Maloon, a financial consultant in San Ramon, California, told the broadcaster that there is less flexibility to cut fixed costs.
Instead, Maloon advised that non-essentials can get a snip if individuals want to save money.
Burt said it’s important for people to avoid financing higher costs by taking out money from a credit card or retirement plan, or through a loan.
‘This is the worst thing you can do. You will pay a heavy price for this in the years to come,” he said.
President Joe Biden last week praised a new report showing inflation was on the way down, calling the change “progress” and proof that his economic plan is working.
The consumer price index fell to 7.7 percent in October, down from a 40-year high of 9.1 percent in June for the fourth straight month.
Core inflation eased to 6.3 percent on an annual basis after hitting a four-decade high of 6.6 percent in September, reflecting volatile food and energy prices.
President Joe Biden said the October numbers show “we’re making progress in bringing down inflation.”
Biden said the declining number shows “we’re making progress in reducing inflation.”
“My economic plan is showing results and the American people are seeing that we are facing global economic challenges from a position of strength. It will take time for inflation to return to normal levels – and we may see setbacks along the way – but we will continue to do so and help families with the cost of living,” he said.
Biden also said the numbers showed food prices have not risen as much as they once did heading into the holidays, a much-needed break.
Although food prices increased by 0.6 percent, the pace was slower than in previous months.
The price of food consumed at home rose 0.4 percent, the smallest increase since December 2021. There were increases in the prices of meat, poultry, fish, eggs, cereals and bakery products. But fruits and vegetables are cheaper.
And he warned Republicans poised to take over the House majority that he would “oppose any attempt to roll back” [his] Worse agenda or inflation.’
Republicans are already preparing to roll back parts of the Inflation Reduction Act, including new, higher taxes on corporations and some climate initiatives.
However, they will also need Senate oversight. Biden still has the presidential veto pen to stop any action by Congress.
Nearly half of voters in the midterm elections that ended Tuesday cited inflation as their top concern, according to a broad survey of more than 94,000 voters nationwide by NORC at the University of Chicago for The Associated Press.
About 8 in 10 said the economy was in bad shape, and a slim majority blamed President Joe Biden’s policies for worsening inflation. Less than half said factors beyond Biden’s control, such as Russia’s intervention in Ukraine, were to blame.
The October numbers were lower than economists had expected and Wall Street reacted positively, with the Dow Jones Industrial Average gaining 750 points, or 2.31 percent, to 33,264 at the open.
Used-car prices fell 2.4 percent from September to October, rising last year as a shortage of computer chips sharply reduced the availability of new cars.
And utility prices eased thanks to a 4.6 percent month-over-month decline in natural gas utility prices as natural gas prices fell from their recent peaks.
However, gasoline prices rose 4 percent between September and October, reversing three months of monthly declines.
Despite an initial easing of inflation last month, the Federal Reserve is expected to continue raising interest rates to try to stem persistently high price increases.
Many economists warn that by continuing to aggressively tighten credit, the Fed could trigger a recession by next year.
So far this year, the Fed has raised the key interest rate six times in significant increments, raising the risk that high interest rates on mortgages, car purchases and other high-cost debt could drag the world’s largest economy into recession.
Annual US inflation remained stubbornly high at 7.7 percent last month, but fell for a fourth straight month.
Gasoline prices rose again in October after several months of decline from their peak in June
In the midterm congressional elections, inflation was on the minds of many voters.
Their economic concerns are said to have led to the loss of Democratic seats in the House of Representatives, although Republicans have not made the big political gains many expected.
By some measures, inflation had started to decline before Thursday’s numbers and could continue to do so in the coming months.
For example, most indicators of workers’ wages show that strong wage increases over the past 18 months have leveled off and started to decline.
While workers’ wages are not the main driver of higher prices, if companies compensate for higher labor costs by charging their customers more, it could add to inflationary pressures.
Supply chain disruptions have largely been resolved, except for automakers, which are still struggling to get the computer chips they need.
Shipping costs have fallen back to pre-pandemic levels. Cargo ships were backed up near the ports of Los Angeles and Long Beach.
This factor should also reduce inflation as new rental price reductions revealed in real-time from sources like ApartmentList and Zillow begin to be captured in upcoming government measures.
Even as many fear that the economy will enter a recession next year, the country’s job market remains resilient.
Employers added an average of 407,000 jobs in the month, and the unemployment rate was just 3.7 percent, near a half-century low. Jobs are still at historically high levels.
However, the Fed’s interest rate hike has seriously damaged the American housing market.
The average interest rate on a 30-year fixed mortgage has more than doubled over the past year, topping 7 percent before falling slightly last week. As a result, housing investment collapsed by 26 percent year-on-year in the July-September quarter.
High mortgage rates have dampened sales. Home prices are slowing sharply from a year ago and have started falling on a monthly basis. The price of renting a new apartment also decreases.
However, due to how the government calculates housing costs, changes in housing prices in the consumer price index are delayed by several months.
The government measures the value of all rents, including most rents in existing leases. Although rents are required for new leases, they are slowly decreasing.