The inflation rate has cooled in recent months, but consumers are still feeling the pinch of higher prices. The Consumer Price Index (CPI) rose by 2.9% over the past 12 months, a significant improvement from the 9.1% peak in June 2022. However, this moderation in inflation has not translated into financial relief for many Americans, especially those living paycheck to paycheck.
According to a recent report, 70% of consumers feel their income has not kept pace with inflation. This sentiment is even more pronounced among paycheck-to-paycheck consumers, with 77% reporting their income hasn’t sufficiently offset rising costs. Even 61% of those not living paycheck to paycheck share this sentiment.
Consumers have observed rising prices for essential goods and services, such as food, housing, and transportation. Nearly three-quarters of consumers believe restaurant prices are rising, and 71% think gas prices continue to increase.
Consumers still struggle amid cooled inflation
The shelter index, which accounts for a significant portion of the overall CPI, rose by 5.1% year-over-year. Despite a 0.25% increase in average hourly earnings in July, bringing the figure to $35.07, many Americans still struggle to make ends meet. The erosion of purchasing power due to inflation and the disparity in how different income groups experience inflation contribute to the ongoing financial strain.
Low-income consumers report higher inflation rates for essential goods like food and housing, forcing them to make difficult financial choices. Many are cutting back on spending, opting for cheaper products, or incurring debt to cope with the rising cost of living. The disconnect between wage growth and the cost of living highlights the ongoing economic struggle for many Americans.
As one report noted, “Consumers continue to feel the financial crunch of rising prices for everything from gasoline to groceries. As incomes fail to keep up with inflation, consumers are adjusting their spending habits, often opting for cheaper, lower-quality products.”
While the cooling inflation rate is a positive sign, it is clear that many consumers, particularly those living paycheck to paycheck, are still grappling with the lingering effects of higher prices. As the economy continues to recover, policymakers and economists will need to address the challenges faced by these vulnerable groups to ensure a more equitable and sustainable future.
- TelegraphHerald.”Inflation is low. Prices are still high. What gives?”.
- TribLIVE.”Inflation explained: It seems everything is more expensive than 5 years ago. Here’s why.”.
- PYMNTS.”Inflation Cools, but Paycheck-to-Paycheck Consumers Still Feel the Heat”.