American families are spending $709 a month more than two years ago due to Biden’s inflation
08/17/2023 // Cassie B. // Views

The Biden administration has been doing its best to downplay the inflation that Americans are currently dealing with, but Moody's Analytics recently put a dollar amount on just how much the country’s economic woes have been costing us.

According to the chief economist at Moody’s, Mark Zandi, Americans are now spending more than $700 a month extra than they did two years ago just to cover everyday goods and services.

Writing on X, formerly known as Twitter, he explained: "To be sure, the high inflation of the past 2+ years has done lots of economic damage. Due to the high inflation, the typical household spent $202 more in a July than they did a year ago to buy the same goods and services. And they spent $709 more than they did 2 years ago."

Much of the increase is being attributed to surging housing costs, but families are also spending more money on groceries, vehicle maintenance and insurance, and recreational services such as cable.

However, he added that he believes inflation could moderate moving forward, expecting drops in the prices on vehicles, housing and electricity. Nevertheless, he cautioned that the jump in oil prices should be monitored.

Unfortunately, many American households are under extreme financial pressure as they cope with the high prices of daily necessities such as rent and food. Low-income Americans are being hit the hardest as many were already living from paycheck to paycheck before inflation started to rise, and even minor price fluctuations can mean the difference between making ends meet or not.

Earnings are not keeping pace with the rising prices. Real earnings, adjusted for inflation, are standing at the levels seen in late 2019. Zandi noted: “Real earnings remain below what they would have been if not for the pandemic and the Russian war, which is weighing on the collective psyche.”

Shoppers are increasing spending at discount chains

Walmart, the world’s largest retailer, recently reported a “strong” quarter thanks to budget-conscious shoppers looking for better deals at the discount chain in the face of relentless inflation in the economy at large. Although their quarter beat forecasts, prompting them to increase their sales and profit guidance for the second time this year, they remained wary of how things would shake out in the long term.

During a call with analysts, CEO Doug McMillon said: “Jobs, wages and pockets of disinflation are helping our customers, but rising energy prices, resuming student loan payments, higher borrowing costs and tightening lending standards, and a drawdown in excess savings mean that household budgets are still under pressure.”

As people cope with higher prices, the store reports shoppers are buying more grocery staples as they cut back on their restaurant spending. CFO John Rainey noted that sales of kitchen tools like stand mixers and hand blenders have been climbing as people prepare more food in their homes. He also reported that shoppers are focusing more on low-price brands and goods.

Meanwhile, DIY retailer Home Depot saw another drop in sales in the second quarter as shoppers continue to hold back from purchasing big-ticket items, focusing instead on smaller home improvement and repair projects.

Although inflation has dropped from its peak of 9.1 percent, it is still significantly higher than the 2 percent target set by the Fed, who has approved nearly a dozen rate hikes in the last 16 months. The federal funds rate currently stands at its highest rate since 2001, and further interest rate hikes this year have not been ruled out.

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