The World Bank is warning that the global economy could suffer 1970s-style stagflation
Families feel the need. Nearly 9 in 10 Americans say they’ve started bargain hunting for cheaper items, and about three-quarters are cutting back on restaurants and entertainment or postponing planned purchases, according to the Post-Scholar poll, which was conducted in late April and early May.
The results come as inflation takes center stage as the top economic and political hurdle for the Biden administration. After months of dismissing price hikes as a short-term shock, the US Federal Reserve recently began raising interest rates in hopes of cooling the economy enough to dampen inflation. Still, two-thirds of Americans (66 percent) expect inflation to get worse in the coming year, while 21 percent expect it to improve and 12 percent believe it will stay the same, according to the survey.
“We’re reducing everything — and I mean everything,” said Bethany Davis, who lives with her boyfriend in Barbourville, Kentucky. “Gas, meat, bread, it’s all damn expensive. One moment you think you can afford to buy something, then you walk into the store and it’s like, ‘No, they don’t have that anymore either.’ ”
Davis, 20, has stopped eating meat, reduced showering and laundry, and rationed trips to the store to save on gas. She and her boyfriend only have one, maybe two, meals a day, which often consist of white bread, Velveeta cheese, and $1 bags of rice, she said.
After more than a year of steadily rising prices, many Americans are beginning to rethink their spending habits to account for inflation. About 6 in 10 people say they drive less, minimize their use of electricity and save less, while about half say they try to buy products before prices go up, according to the survey. And just under 3 in 10 say they have taken on a second job or worked more hours because of inflation.
The survey results could also provide an early warning of inflation in the coming months. As more Americans change their behavior and assume that inflation will get worse, these measures can push up inflation and create a cycle that is difficult to break. In fact, about 52 percent of Americans in the survey said they bought products before prices went up.
“People’s inflation expectations are rising,” said John Taylor, an economist at Stanford University and a former Treasury Department official in the George W. Bush administration. “My concern is that if people say, ‘Inflation is picking up, let’s buy now,’ that will push inflation even higher.”
Inflation-related lifestyle changes are more common among Americans, who say rising prices are a “big financial drain” on their households. Almost 8 in 10 people in this group say they are saving less, and more than 4 in 10 say they have taken on extra work.
The poll found that 57 percent of Americans say they have just enough money to sustain their standard of living, while 20 percent say they are falling behind financially and 23 percent say they are making progress. Still, two-thirds say they are optimistic about their family’s financial situation.
“We’ve all noticed that prices have gone up over the past year,” said Antonio Doblas-Madrid, an economics professor at Michigan State University. “People are looking at this and expecting it to continue, which can be a worrying sign.”
More than a third of Americans say recent price hikes have been a major financial drain on their households, with concerns peaking among low-income households: a 54 percent majority of people with household incomes under $50,000 say rising prices are a “major financial drain,” compared to 31 percent of those earning between $50,000 and $100,000 and 17 percent of those earning $100,000 or more.
Adults under 50 and women were also more likely than older adults and men to report greater financial stress as a result of inflation.
“Inflation is a regressive tax: it’s very costly for the poor,” Doblas-Madrid said, adding that one of the most crucial factors is often whether someone owns or rents their home. “If you rent, rents go up as inflation goes up, but if you’re a homeowner, your property starts going up.”
Housing – which accounts for the bulk of most household budgets – has been a particular source of stress for many families. According to the S&P CoreLogic Case-Shiller Index, home prices have risen 21 percent over the past year, while asking rents have risen 15 percent nationwide, Redfin data shows.
About 1 in 4 Americans in the Post-Schar School survey say it would be easy to afford a house in their current neighborhood if they had to move. But a majority of 74 percent say it would be either “somewhat difficult” or “very difficult” to move into their neighborhood.
Meanwhile, almost half of renters report significant financial strains from inflation, compared with 30 percent of homeowners.
Tosha Jankosky pays $1,356 a month for a two-bedroom apartment she shares with her teenage sons in Noblesville, Indiana. The 41-year-old office manager makes $23 an hour – the best salary of her career – but says she still feels like she’s losing ground financially.
She recently canceled her cable subscription, saved on groceries and put off buying furniture like bedsteads and a sofa. Nevertheless, she says, it is becoming increasingly difficult to afford basic services.
“I should be able to live on my own,” she said. But “I’m preparing to pay rent and it’s going to cost every penny I’ve earned.”
Gas prices — which are at record highs of nearly $5 a gallon — are another source of stress. Most drivers — 64 percent of them — are making fewer trips to the grocery store to save on gas, the survey found, while 34 percent say they drive slower and just over 2 in 10 have carpooled or from to because of gas prices worked from home.
Meanwhile, more than 4 in 10 drivers say they only partially fill their car’s gas tank, a figure that jumps to 61 percent of drivers earning under $50,000, according to the survey.
Americans blame soaring gas prices on multiple factors: 72 percent blame companies trying to boost profits and 69 percent blame Russia’s crackdown on Ukraine, while 58 percent each blame President Biden and pandemic disruptions.
Back in Kentucky, Davis says gas has become such a liability that she and her boyfriend recently filled a few extra plastic jugs with fuel when gas prices temporarily fell below $4.50 a gallon. She and her boyfriend both work at Dollar General and together they bring home $300 a week, of which $80 goes to fuel their old pickup truck.
High gas prices not only squeeze her budget, but also limit job opportunities in her small town. The best paying jobs are in factories on the outskirts of town, about 50 miles away.
Davis’ boyfriend recently quit his $10 job at a cookie factory after the 80-minute daily commute became unsustainable. His job at Dollar General is closer to home, but he only pays $9.25 an hour.
“If you live in the middle of nowhere and gas prices keep going up, it affects everything,” Davis said. “The fight is getting harder and harder.”
In addition to changing driving habits, economists say rising prices — and changing consumer behavior — are likely to have a greater impact on important life choices, such as driving. B. where you live and whether you get married or have children.
Almost every day Jayden Collins and his wife talk about starting a family and then check their savings account to see if they can afford it.
Inflation is a persistent obstacle, said Collins, a nursing student in Logan, Utah. Monthly rent and utilities are up about 50 percent since last year to $1,100. During the school year, he earns $17 an hour at a warehouse, but both he and his wife look for weekend jobs to make ends meet.
“Right after we got married I was like, ‘Let’s go out. It’s like a date night every night,'” said the 22-year-old. “Now we’re like, ‘Man, that turned out to be a lot more expensive than I thought it would be.’ ”
This leads to almost nightly discussions about their financial future, he said. Family members and friends around them are pregnant or have young children, making him wonder how long he and his wife will have to wait before having children of their own.
“We definitely want to go there,” he said. “My wife says, ‘So how can we improve our spending?’ That’s one of the most important things we’re talking about. At least once a week we ask ourselves, ‘What have we spent money on that we couldn’t have spent money on?’ ”
The post-swarm survey was conducted from April 21 to May 12 among a random national sample of 1,055 adults who completed an online or paper questionnaire. The margin of error is plus or minus four percentage points overall and for the sample of 978 drivers.