Food, energy, and housing prices are all on the rise in the United States, which is putting a strain on families’ finances.
On Friday, the University of Michigan will announce its March sentiment index, which reflects the bleak outlook for American consumers. Due to an increase in the cost of living as measured by the CPI, it dropped from 62.8 in February to 59.7 in March, the lowest reading in more than a decade (CPI).
The Bureau of Labor Statistics reported a 7.9 percent increase in the U.S. Consumer Price Index (CPI) in February, up from 7.5 percent in January. It’s been 40 years since the last time the inflation rate was this high.
In February, gasoline prices rose by 6.6%, which pushed the Consumer Price Index (CPI) up. A third of the monthly rise was attributed to it. Food prices increased by 1%, while housing prices grew by 1.4%, the most monthly increase since April 2020.
Since the Russian-Ukrainian conflict, inflation in the food and energy supply chains has been exacerbated by supply chain bottlenecks and labor market frictions that have been exacerbated by precipitous monetary easing.
Housing is the latest component. However, the conflict just made matters worse. As one of the world’s leading grain producers and exporters, Russia is also a major energy exporter.
Increased inflation has a negative impact on real incomes, especially for those at the lower end of the income spectrum. Because of this, it has a negative effect on consumer sentiment.
According to Michigan research, things will only get worse from here on out. “University of Michigan researchers found that consumer sentiment continued to decrease as inflation-adjusted earnings fell, which was amplified by rising fuel prices as a result of Russia’s invasion of Ukraine.
This is the biggest monthly increase in petrol prices in decades, and inflation expectations for the year ahead have risen to their highest level since 1981.” Personal finances have been predicted to suffer at an ever-increasing rate since the 1940s when the polls began.”
A “silver lining” in all of this? It all comes down to a few variables. Job growth in recent months has provided a buffer for those returning to work.
The biggest unknown is the war’s current state of escalation University of Michigan report: “The largest source of uncertainty is unquestionably inflation and the possible impact of Russia’s incursion into Ukraine.”
“The Ukraine invasion was noted by 24% of all respondents when asked about the economic prospects in the March survey. The Index of Consumer Expectations across all households dropped by 13.2 points as a result of this acknowledgment”
While the length of the Russian-Ukrainian conflict is not yet unknown, one thing is certain: American consumers and investors alike are in for a difficult time. They’ve watched as inflation and the potential for increased interest rates have eaten away at their savings.