Persistent and record inflation hasn’t been a problem for American consumers for decades, but it has taken a dramatic turn over the past year and a half and has yet to show clear signs of abating. despite an aggressive monetary policy. policy measures to curb soaring costs.
And economic strife is hitting individuals and families where they hurt the most, as rising costs of basic necessities have been a major driver of inflation rates that have reached or near highs of 40 years for most of the year.
The results of a new Deseret News/Hinckley Institute of Politics poll have captured the impact of inflation on Utahans, as well as their growing fatigue and worries about escalating costs for goods and services. .
In a statewide survey conducted Sept. 3-21 of 815 registered Utah voters by Dan Jones & Associates, 96% of respondents said they were very or somewhat concerned about inflation. and 4% were not very or not at all worried. The poll has a margin of error of plus or minus 3.43 percentage points.
The number of Utahns citing inflation as their top concern has been on the rise since a July 2021 Deseret News poll found 85% of Utahns were very or somewhat concerned about inflation and another record in February 2022 when 93 % of survey participants registered concerns about rising prices for goods and services.
The level of concern changed slightly depending on political beliefs. Republicans and conservatives in the poll were more concerned than Democrats and Liberals, though all were above 84%. Additionally, Utahans expressed a high percentage of worry about inflation, regardless of income.
Nate Lloyd, associate director of research for the University of Utah’s Kem C. Gardner Policy Institute, wasn’t surprised at the level of concern Utahns have about inflation and said these Concerns are shared by federal policymakers who have worked to dampen the US economy through a series of interest rate hikes this year.
“The Federal Reserve’s five rate hikes so far this year are all aimed at fighting inflation,” Lloyd said. “It’s a top concern for economists at the Fed and those trying to get inflation under control.
“That’s really the biggest risk to the economy right now.”
Wednesday marked the Fed’s third consecutive 0.75% increase in the rate it charges for loans between financial institutions and, along with other increases this year, marks the fastest rate escalation in decades.
Lloyd said the high inflation was due to a fundamental imbalance of supply and demand, with various issues raising the costs of producing and delivering goods alongside a demographic of American consumers who have seen his wages steadily increase and who continues to spend money received through the federal COVID-19 stimulus fund.
“People have money to spend,” Lloyd said. “The vast majority of people are employed and we still see very low unemployment. Although there is some variation between income levels, American households are quite sound financially.
So far, consumer financial health and elevated spending rates have held up even as the Federal Reserve raised rates to raise the cost of debt in an effort to cool consumer spending. Theoretically, this should lower inflation by tackling demand.
Last week, mortgage rates broke through the 6% threshold and reached their highest level since 2008, increasing pressure on the US housing market and excluding even more potential buyers.
Freddie Mac predicts that high rates will continue to dampen US demand. Although the inventory of homes for sale is increasing, it still remains at “inadequate” levels, which means the decline in home prices will likely continue – but not fall off a cliff.
And the average credit card interest rate hit 17.96% this month, the highest rate since 1996, according to Bankrate.com.
Bankrate senior industry analyst Ted Rossman told MarketWatch that for those with credit card debt, that means your rate could fluctuate accordingly.
“Rate hikes typically affect new and existing balances,” Rossman said, adding that “most credit cardholders are now facing rates that are 225 basis points higher than they were a year ago. barely six months.
A concern shared by Lloyd and many US economists is that the Fed’s aggressive interest rate strategy could push the economy into recessionary conditions.
The latest Deseret News/Hinckley Institute poll found it’s also a concern for an overwhelming percentage of Utahns, with 88% saying they were very or somewhat concerned about a recession hitting next year while 12% weren’t worried and 1% weren’t I’m not sure or didn’t know.
It turns out that the people of Utah have been a little more forward-thinking than even the Federal Reserve when it comes to anticipating the tides of the US economy.
In July 2021, Federal Reserve Chairman Jerome Powell and other Fed board members called the then rise in inflation “transitional,” a description they would all recant from. later when inflation continues to persist.
But in the survey that month, of the 85% of Utah residents who said they were concerned about inflation, 25% said the rise in prices would be “temporary” compared to 60% who thought inflation would be a “lasting” concern.
A number of economists are predicting that the Fed’s sharp rate hikes will lead to job cuts, rising unemployment and a generalized recession later this year or early next year.
While the cost of borrowing is on the rise – exactly the kind of results the Fed hopes to see – other consumer trends are offsetting the dampening effect of rate hikes.
These factors include a US job market that continues to turn red and consumer spending that remains robust.
Employers added 315,000 jobs in August, according to the latest report from the US Department of Labor. The national unemployment rate climbed to 3.7% from a 50-year low of 3.5% in July. Hiring is down from July’s 526,000 new hires, but August volume is still well above pre-pandemic rates, and job openings still far outnumber the workers available to fill them. .
Data from the Labor Department shows that eight of 13 retail spending categories rose in August, according to CNN. Spending at food and beverage retailers rose 0.5% for the month and was up 7.2% over the past year. Sales increased at restaurants and bars, as well as at car dealerships, which jumped 2.8% on the month. Spending on building materials and equipment, clothing and sporting goods also increased.