The Great Economy????

In America, the population is watching the fast approaching Presidential election year with bated breath. They are being blasted with claims by President Biden, his political party, the news media, experts and economists, all making the claim about our “great economy”. The numbers being touted purport  to show the economy growing, inflation falling, jobs are growing while unemployment is low. Yet polls are showing that the average citizen has a very low opinion of the economy and about the job that President Biden is doing with the handling of it. Why the big disconnect?

Well since 2019, consumers have been feeling the effects of the huge spike in inflation. And while most Americans have seen wage increases, they are feeling that their quality of life is being eroded.

Since 2019, food inflation in the United States has had significant impacts on American consumers. The COVID-19 pandemic caused a significant rise in the prices of food at grocery stores in 2020, with retail food price inflation outpacing the historical average by 75%​. ​The price of food at home (groceries) increased 3.9% from 2019 to 2020, the largest year-over-year increase since 2011​​. This trend continued, with food-at-home prices increasing by 11.4% in 2022 compared to the previous year, vastly exceeding the 20-year historical level of retail food price inflation of 2.0% per year​.

Consumers changed how they bought food, with a marked increase in food-at-home spending, largely due to higher sales at grocery stores and warehouse clubs​. The shift was a result of the pandemic, which disrupted dining patterns and led to more home cooking.

Food inflation has not affected all households equally. In 2022, middle-income households found that their income was not keeping pace with rising food prices, while the lowest and highest income households saw their incomes grow faster than the price increases​. This indicates a squeeze on middle-class purchasing power when it comes to food. The most significant price increases were observed in meat categories, with beef and veal prices increasing by 9.6%, pork by 6.3%, and poultry by 5.6%​

These increases further contribute to the strain on household budgets for those who consume these products regularly. The average price of food in the U.S. saw a year-over-year increase of 3.7% as of September 2023, following an annual increase of 4.3% in August. The year 2021 witnessed the largest annual increase in food prices since the 1980s, at about 11% from 2021 to 2022. These factors collectively suggest that American consumers have faced significant financial stress due to food inflation since 2019, with a notable impact on their spending habits and purchasing power, particularly for middle-income households.

So while food inflation has had a huge impact on how American consumers view the economy, it’s not the only factor driving the public’s low opinion of it. The cost of buying a new vehicle or a new home has added to the dismal view of the economy. Since 2019, the cost of buying and owning a car in the U.S. has soared. The price tags on both new and used cars have jumped up, with new car prices going up by over 4% in early 2023 alone​​. The trouble didn’t stop at the dealership, though. Interest rates, which directly affect car loans, have also climbed. This one-two punch means that not only are the cars more expensive off the lot, but the cost of financing them has gotten steeper, too. It’s not unusual today for purchasers of new vehicles to have a payment that’s north of a thousand dollars a month. Oh, and let us not forget that the insurance you must have for that new vehicle has skyrocketed too. For a lot of Americans, this has made owning a car way pricier, and it’s squeezed their wallets hard, especially when you consider that used car prices outpaced overall inflation by a big margin​.

The story with housing isn’t much brighter. House prices have been on a steep climb, with a dramatic surge during the pandemic as people started hunting for homes in less crowded spots, away from the big cities​. This huge jump in demand shot prices up, but that’s not all. Interest rates, which greatly influence mortgage rates, have also jumped up. This increase means that monthly mortgage payments are higher for homebuyers, even if they’re buying the same priced home as before the interest hike. For renters, it’s a similar deal. Rent has ticked up, and for folks at the lower end of the income scale, it’s a heavier burden to bear​. ​.

In short, the spike in interest rates has ramped up the cost of borrowing money. For Americans, this has turned what was already a pricey proposition—buying cars and houses—into an even costlier endeavor. It’s not just about the sticker price anymore. It’s about how much extra you’re paying in interest over the years on loans and mortgages, which has a big impact on long-term financial planning and daily living costs.

So while wages have increased, they have not kept pace with the huge increase in prices. And all the talk about inflation falling, it leaves out the fact that prices are not falling. Couple this with President Biden constantly saying that he is building out the economy from the middle out and it makes what the American people are feeling, very valid. So, is it any wonder that Americans don’t have a favorable opinion about our supposed “Great Economy”. Feel free to make your comments on how the current economy is affecting you. None of your personal information will be published. Let us know how you feel about this subject.