World Bank warns global economy could suffer 1970s-style stagflation
Families feel the pinch. Nearly 9 in 10 Americans say they have started looking for cheaper goods, and about three-quarters are cutting dining and entertainment, or postponing planned purchases, according to the Post-Schar poll conducted in late April and early May. .
The findings come as inflation takes center stage as the main economic and political hurdle for the Biden administration. After months of viewing price increases as a short-term shock, the Federal Reserve recently began raising interest rates in hopes of cooling the economy enough to temper inflation. Even so, two-thirds of Americans (66%) expect inflation to get worse in the coming year, while 21% expect it to get better and 12% think that it will remain the same, according to the poll.
“We’re cutting back on everything — and I mean everything,” said Bethany Davis, who lives with her boyfriend in Barbourville, Ky. “Gas, meat, bread, everything is expensive as hell. One moment you think you can afford to buy something, and then you go to the store and it’s like, ‘No, I can’t have that anymore either.’ ”
Davis, 20, has stopped eating meat, cut back on showers and laundry and rationed trips to the store to save gas. She and her boyfriend are down to one, maybe two meals a day which often consist of white bread, Velveeta cheese and $1 bags of rice, she said.
After more than a year of steadily rising prices, many Americans are beginning to rethink their spending habits to account for inflation. Around 6 in 10 people say they drive less, minimize their electricity use and save less, while around half say they try to buy products before prices rise, the survey found. And just under 3 in 10 say they have taken a second job or worked more hours due to inflation.
The poll results could also be a harbinger of the trajectory of inflation in the months to come. As more and more Americans change their behavior on the assumption that inflation will get worse, these actions can drive up inflation, leading to a cycle that is hard to break. Indeed, some 52% of Americans surveyed said they purchased products before prices rose.
“People’s inflation expectations are rising,” said John Taylor, a Stanford University economist and former Treasury Department official in the George W. Bush administration. “What worries me is that if people say, ‘Inflation is going up, let’s buy now’, that’s going to increase inflation even more.”
Inflation-related lifestyle changes are more common among Americans who say rising prices are a “major financial stress” for their household. Nearly 8 in 10 people in this group say they save less and more than 4 in 10 say they have taken on extra work.
The poll found that 57% of Americans say they have just enough money to maintain their standard of living, while 20% say they are financially behind and 23% say they are progressing. Yet two-thirds say they are optimistic about their family’s financial situation.
“We’ve all noticed that prices have gone up over the past year,” said Antonio Doblas-Madrid, an economics professor at Michigan State University. “People are watching this and expecting it to continue, which can be a worrying sign.”
More than a third of Americans say recent price increases have been a major financial stress on their households, with concerns peaking among low-income households: “vs. 31% of those with incomes between $50,000 and $100,000 and 17% of those with an income of $100,000 or more.
Adults under 50 and women were also more likely to report higher financial stress due to inflation than older adults and men.
“Inflation is a regressive tax: it’s very costly for the poor,” Doblas-Madrid said, adding that one of the biggest determining factors is often whether someone owns or rents their home. “If you’re a tenant, rents go up when inflation rises, but if you’re a landlord, your property starts to appreciate.”
Housing – which makes up the biggest chunk of most household budgets – has been a particular source of strain for many families. Home prices have risen 21% over the past year, according to the S&P CoreLogic Case-Shiller Index, while asking rents have risen 15% nationally, according to data from Redfin.
About 1 in 4 Americans in the Post-Schar School poll say it would be easy to afford to rent a home in their current neighborhood if they had to move. But a majority of 74% say it would be either “quite difficult” or “very difficult” to relocate to their neighborhood.
Meanwhile, almost half of renters report major financial stress due to inflation, compared to 30% of owners.
Tosha Jankosky pays $1,356 a month for a two-bedroom apartment she shares with her teenage sons in Noblesville, Ind. The 41-year-old office manager earns $23 an hour – the best salary of her career – but says she still feels like she is losing ground financially.
She recently ditched her cable subscription, cut back on grocery shopping, and put off buying furniture such as bed frames and a sofa. Yet, she says, it is becoming increasingly difficult to pay basic expenses.
“I should be able to live on my own,” she said. But “I’m getting ready to pay rent and it’s going to take every penny I’ve earned.”
Gasoline prices – which are reaching record highs at nearly $5 a gallon – are another source of stress. Most drivers – 64% of them – take fewer trips to get groceries to save gas, while 34% say they drive slower and just over 2 in 10 have carpooled or worked at home because of gas prices.
Meanwhile, more than 4 in 10 drivers say they only partially filled their car’s gas tank, a figure that rises to 61% of drivers with incomes under $50,000, the survey found. .
Americans blame several factors for rising gas prices: 72% blame companies trying to boost profits and 69% blame Russia’s actions against Ukraine, while 58% each blame President Biden and pandemic disruptions.
Back in Kentucky, Davis says gas has become such a burden that she and her boyfriend recently filled a few extra plastic jugs with fuel when gas prices temporarily dipped below 4.50. $ per gallon. She and her boyfriend both work at Dollar General and bring home $300 a week, including $80 for gas in their old pickup truck.
High gas prices, she said, not only squeeze her budget, but also limit job opportunities in her small town. The best paying jobs are in the factories on the outskirts of the city, about 80 kilometers away.
Davis’ boyfriend recently quit his $10-an-hour job at a cookie factory after the 80-minute daily commute became untenable. His job at Dollar General is closer to home but only pays $9.25 an hour.
“When you live in the middle of nowhere and gas prices keep going up, it affects everything,” Davis said. “The fight only gets harder.”
Beyond changing driving habits, economists say rising prices — and changing consumer behavior — are likely to have bigger ripple effects on big life decisions, such as where to live and get married or have children.
Almost daily, Jayden Collins and his wife talk about starting a family, then check their savings account to see if they can afford it.
Inflation is a persistent obstacle, said Collins, a nursing student in Logan, Utah. Monthly rent and utilities are up about 50% from last year to $1,100. He makes $17 an hour working in a warehouse during the school year, but he and his wife are looking for weekend jobs to make ends meet.
“Right after we got married, I was like, ‘Let’s go out. It’s like a date every night,’ the 22-year-old said. “Now we’re like, ‘Man, this happened. turned out to be much more expensive than I thought.’ ”
This leads to almost nightly discussions about their financial future, he said. Family members and friends around them are pregnant or have young children, leading him to wonder how long he and his wife will have to wait before having children of their own.
“We really want to get there,” he said. “My wife says, ‘So how can we improve our spending?’ This is one of the main things we talk about. At least once a week we say, “What did we spend money on that we couldn’t have spent?” ”
The Post-Schar poll was conducted from April 21 to May 12 among a random national sample of 1,055 adults, who completed an online or paper questionnaire. The margin of error is plus or minus four percentage points overall and among the sample of 978 motorists.