Many families in the United States are finding it harder to get by as they see their bills for various goods and services shoot upward amid the worst inflation in more than four decades.
Inflation increased by 8.5% for the 12 months ending in March, according to data released Tuesday by the Bureau of Labor Statistics. While that headline increase is the most since 1981, some essential expenses have increased by an even greater margin and are weighing heavily on consumers.
Families in the middle and lower classes are getting hit particularly hard. Here is what households are paying for a few recurring necessities.
GROCERY BILLS
The average price of food at home has ballooned 10% over the past year, according to the consumer price index, a brisker increase from the 6.1% growth in the cost of food at restaurants.
Average weekly grocery spending is now at $148 per week, a big leap from the average pre-pandemic amount of $113.50, according to data from FMI, the Food Industry Association. (People spent even more at grocery stores during the height of the pandemic when eating out was not an option, though.)
Those who are struggling financially are typically less likely to eat at restaurants, making the increased cost of food at home particularly pernicious. Staples such as poultry, fish, and eggs have increased by 13.7% on the year, while the price of beef has risen by 16%.
For example, someone who wants to purchase a gallon of whole milk is now paying $4.02 on average, more than half the federal minimum wage, according to the Department of Agriculture. That is a dramatic increase from last year, when a gallon of whole milk went for about $3.59 on average. If a family were to buy two gallons of milk per week, that translates to $44.72 in extra annual spending.
RECESSION RISK RISING AND ADDING TO INFLATION PROBLEMS
Similarly, a dozen large eggs used to cost $1.63 a year ago but will now set consumers back by $2.05 on average. If a family wanted to make burgers, a pound of ground beef now costs $4.76 on average compared to $4.04 in March of last year — a whopping 17.8% increase.
While some families have had to trim their spending in other areas to afford groceries, others have had to change their dining habits entirely and possibly forgo more nutritious foods in favor of cheaper items that might be less healthy, according to Will Hild, executive director of Consumers’ Research.
Calorie for calorie, it is cheaper to meet one’s caloric daily intake by consuming high-carbohydrate items such as pasta that might be lower in nutrients than, say, a chicken breast or a steak with vegetables, he told the Washington Examiner.
FILLING UP GAS TANKS
Gas prices are a burden that many consumers don’t have the luxury to cut down on.
For example, many people, especially outside the country’s urban cores, are forced to drive a set distance to work every day in order to bring home a paycheck.
Gas prices have gone through the roof, especially in the past month, because of Russia’s war in Ukraine. A year ago, a gallon of regular unleaded gas cost $2.86 on average, according to AAA. The average price for a gallon of gas is now sitting at $4.10.
The owner of a 2010 Toyota Camry would have had to spend $52.90 to fill it up with gas this time last year. That same person is now forced to shell out $75.85 for the same amount of fuel — an enormous financial burden. If that same person is forced to fill up once a week to drive from their home to work and the grocery store, that tacks on nearly $1,200 to their annual gas bill.
“It’s not like people are necessarily taking Sunday drives — it’s that they have to get to and from their job in order to continue to earn money,” Hild pointed out. “This is unfortunately a real dark time in America where the things that we have to buy are skyrocketing.”
RENT AND HOUSING
Another area in which bills are increasing is housing. In terms of the CPI, the average price of shelter in the U.S. has increased 5% over the past year.
The rate on a 30-year fixed-rate mortgage recently shot above 5%. According to Mortgage News Daily, the average rate is now at 5.12% — the highest rate for a 30-year mortgage since rates crossed beyond 5% for a couple of days in 2018 and, before that, 2011.
The monthly mortgage payment on a median asking price home has risen to a record high of $2,234, according to real estate brokerage Redfin. That is up 31% from the year before, when mortgage rates were 3.18%. The average mortgage payment is up $537 since the start of the year alone.
Because of the higher rates, buying a home is less affordable, so some consumers are choosing to rent apartments or homes.
Rent prices have shot up far beyond the 8.5% headline inflation, with the average one-bedroom rental costing about $1,684 in March, according to data compiled by Rent.com. One- and two-bedroom rentals were up 24.4% and 21.8%, respectively, in March.
The soaring cost of necessities, as opposed to luxuries, illustrates the hardship imposed by inflation.
“It’s even worse than that because if you subtract out all of these consumer goods that might be nice to have but aren’t vital to your survival, then it’s even worse than it looks,” Hild told the Washington Examiner. “A lot is being made of the 8.5% number is, but if you dig in, it gets even worse because you’re looking at the things that people can’t not buy.”
In order to combat the higher prices, the Federal Reserve announced it would raise its interest rate target by a quarter of a percentage point, the first rate hike since 2018. Raising interest rates is meant to slow spending and bring down the pace of inflation, but consumers will still be dealing with prices rising more quickly than usual throughout at least the rest of the year, according to economic forecasters.
A recent Wall Street Journal survey of economists found that on average, they expect inflation to tamp down to 7.5% by June but still remain at 5.5% by December, a rate that is still far above the Fed’s target of 2%.
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Additionally, consumers could end up getting walloped by a recession in the coming months. When the Fed raises interest rates, it naturally slows the economy, and given how hot inflation has been, the Fed will likely have to act more aggressively, which could trigger a recession.
The yield on certain shorter-run Treasury notes has increased higher than certain longer-run notes, something that is called an “inversion.” The inversion is a major warning sign that investors believe inflation won’t be a problem over the long run because the economy is going to enter a recession.
