Families living in the United States are feeling the pinch of inflation. They are now spending $709 per month more than they were just two years ago.
“High inflation of the past 2+ years has done lots of economic damage,” Mark Zandi, chief economist at Moody’s Analytics, wrote in a post on X, the platform formerly known as Twitter.
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.
— Mark Zandi (@Markzandi) August 10, 2023
Even though prices have soared, real earnings (wages), which adjust for inflation, are stuck at late 2019 levels. “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,” Zandi told CNN in an email on Friday.
Most families are having to cut back as prices have surged. Most of that increase in spending is driven by housing costs, which have surged, Zandi told CNN in an email on Friday. He added that families are also spending more at the grocery store; on buying, maintaining, and insuring vehicles and on recreational services like cable.
Consumer prices increased by a cooler-than-expected 3.2% in July compared with the year before, according to a government report released Wednesday. Even though that was slightly higher than the annual inflation rate in June, most of the impact was driven by calendar effects.
“In sum, the report was encouraging,” Bank of America economists wrote in a note to clients on Thursday, adding they “wouldn’t be surprised to see another soft” inflation reading in August.
Although month-over-month inflation readings are “still likely to be bumpy,” Bank of America economists said they “believe that the current disinflation is not a ‘head fake.’” –CNN Business
Zandi calculates that the typical household spent $202 more this July than they did a year ago to buy the same goods and services. But that pales in comparison to the peak of $536 for this year-over-year metric, a record hit back in June 2022, when gas prices spiked above $5 a gallon for the first time in history.
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