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Inflation Concerns Persist for Middle-Class Americans


According to a recent study by Primerica, nearly 75% of middle-class Americans feel that they are struggling to keep up with basic living costs, despite signs of easing inflation. The Bureau of Labor Statistics reported that real average hourly earnings for all employees decreased by 0.2% in September and increased by a mere 0.5% on an annual basis, failing to keep pace with the steady 3.7% annual inflation rate.

Contrary to expectations, average Americans are bracing themselves for further price hikes. Primerica’s U.S. Middle-Income Financial Security Monitor revealed that over half of middle-income Americans view their financial situation as either poor or unsatisfactory. Alarmingly, 72% expressed concerns about meeting the rising cost of living, as they believe their incomes are falling behind.

One area that has experienced notable cost increases is food. The Consumer Price Index (CPI) report for September highlighted a 2.4% annual climb in grocery prices and a 6% rise in dining-out costs. Although these figures represent a decline from the inflation levels witnessed in 2022, the persistent price growth is placing strain on consumers already grappling with higher borrowing costs.

Despite some positive movement, the core CPI, which excludes the more volatile food and energy costs, continues to surpass the Federal Reserve’s target inflation rate of 2%. While annual core inflation dipped from 4.3% to 4.1% in September, it remained steady at 0.3% over the month.

In summary, middle-class Americans face ongoing challenges as they strive to keep up with rising living costs. Despite a slight easing of inflation, concerns about meeting expenses persist due to stagnant incomes and steady price growth, particularly in the food sector.

Understanding the Factors Driving Inflation

Inflation remains a pressing concern as housing costs and other services continue to contribute to its elevation. In September, core services, excluding rents of apartments and homes, experienced a significant jump of 0.6%, surpassing August’s pace of 0.4%. This increase can be attributed to rising hotel-room prices and insurance costs.

Of particular note is the staggering annual price growth in motor-vehicle insurance, which reached 18.9% last month. Insurers are grappling with higher claims costs and implementing rate adjustments, leading to the expectation that premiums will remain high well into 2024.

However, amidst these concerning trends, there were some positive aspects in the September data that might alleviate the strain on consumers’ budgets. Core goods prices, which exclude food and energy commodities, continued to deflate, with a month-to-month decrease of 0.39%.

This deflation was primarily driven by a continued decline in used-vehicle prices, marking the fourth consecutive month of decrease, with an annual decline of 8%. Conversely, new vehicle prices saw an annual increase of 2.5%, potentially influenced by the ongoing auto workers’ strike. Experts at Morgan Stanley predict that overall core goods deflation will persist throughout this year and the next, reflecting improvements in supply chains and lower demand for goods.

The slowdown in the pace of price growth might dissuade the Federal Reserve from implementing another interest-rate hike in November. Mohamed A. El-Erian, chief economic advisor at Allianz, shared on X (formerly known as Twitter) that the September inflation data serves as a reminder of the challenges faced in combating inflation in its “final mile.”

Additionally, consumer sentiment remains bleak as Primerica’s findings indicate that most individuals do not anticipate a significant improvement in their financial situations. Independent inflation-data aggregator Truflation’s estimates suggest that the average American’s purchasing power has declined by more than 20% over the past three years, lending validity to consumer pessimism.

In conclusion, understanding the factors driving inflation is crucial for both policymakers and consumers alike. While certain service-related costs continue to contribute to inflation, there are also signs of relief in the form of deflating core goods prices. Keeping a close eye on these trends will be essential in navigating the challenges posed by inflation.

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