13 Insights That Explain Americans’ Views and Confusion About Inflation
Inflation is a scary and confusing concept for many Americans. While some economic indicators suggest a bright future, many concerned citizens remain unconvinced.
A large majority of Americans (74%) say inflation is a major issue, and just over one in five say it’s the most important issue the country faces. However, when Americans discuss inflation, they don’t always see eye to eye with each other, with government officials, or with the media.
These 13 data points help explain the disconnect.
1: How Americans Define Inflation
A poll by YouGov published in December 2023 shows that 53% of Americans define inflation as the amount prices have risen, not the rate at which prices are currently rising.
2: How the Government Defines It
When the government releases inflation data, it shows the current rate of inflation. So, while the inflation rate may be lower in 2024 than much of 2023 or 2022, it doesn’t mean prices are dropping. Instead, they may be holding steady or rising more slowly, depending on the month.
3: Most Believe Prices Are Increasing
According to YouGov’s findings, 59% of Americans say prices are currently increasing significantly. Only 25% say they seem to be stabilizing.
4: Even High Earners Say Prices Are Up
Half of Americans earning more than $100,000 per year say prices are increasing a lot, showing that wealth doesn’t necessarily change pricing perceptions.
5: Some Areas Are Stabilizing
In reality, prices in some key areas, such as energy, have gone down. Fuel prices are down significantly year over year, as are other energy prices.
6: But Others Aren’t
Still, food prices, the cost of housing, and the cost of medical services are all significantly higher than they were in 2023.
7: Food May Be the Biggest Factor
Significant increases in food prices may have the greatest impact on public outlook. Restaurant prices are up 5.1% year over year, and Americans are spending more of their income on food than they have in thirty years.
8: Political Identity Plays a Role
Republicans were more likely than Democrats to say that prices are currently seeing a sharp rise. It’s possible that survey respondents are signaling their politics in polls, as Republicans are more likely to see Biden’s handling of the economy as a major issue.
9: Age Matters Too
Most people older than 30 say prices are increasing significantly, while those under thirty are less likely to think so. However, younger Americans were more likely to say they weren’t sure whether prices were still increasing or not, showing their uncertainty about the economy in general.
10: Income Isn’t Growing Fast Enough
Most Americans (52%) feel their income is growing just fast enough to keep up with inflation. However, a significant portion of Americans (30%) say they’re falling behind.
11: High Earners Feel the Pinch
More than one in ten Americans earning over $100,000 are having difficulty meeting expenses. Sixty-three percent of them say they’re just barely keeping up with rising costs.
12: Data Shows Income Is Up
Though many Americans feel like they’re having difficulty with price increases, government data shows wages and resulting purchasing power are up compared to before the pandemic. Still, that doesn’t mean wages are rising at the same rate as inflation.
13: Again, Politics Matter
Republicans were significantly more likely than Democrats to report that they were falling behind economically. This may mean that poll respondents are signaling their political beliefs when answering questions about the economy.
Is Inflation a Problem?
Consumers naturally dislike inflation because it means lower purchasing power. However, economists often see a low and steady inflation rate as healthy for the economy.
Compared to the Rest of the World
Current U.S. inflation rates look similar to other developed countries. In January 2024, U.S. inflation was 3.1%. In the United Kingdom it was 4% and in Canada it was 2.9%.
Why Perception Matters
Regardless of what the inflation rate actually is, Americans clearly perceive inflation as a problem. Economic perception is often a major driver in voting behavior. As James Carville said when advising Bill Clinton in his 1992 White House run, “It’s the economy, stupid.”
Bidenomics
President Biden embraced “Bidenomics” as a shorthand for his economic plans. While his administration continues to illustrate the ways in which Bidenomics is working, it seems the public, in no small part, disagrees.
Especially Among Youth
While the economy and America’s perceptions of inflation aren’t the only deciding factor in the 2024 election, they are key, especially to younger voters. Polling shows economic concerns are particularly high among voters under thirty, and many of them are leaving Biden’s camp because of them.
Changing Behaviors
In the face of higher prices, consumers are beginning to shift their buying habits. By purchasing store brands, used cars, and fewer gourmet items, Americans are forcing corporations to slow their price hikes, which many see as a positive sign.
A Red Herring
Some are questioning whether inflation is even the problem. One progressive think tank claims corporate greed is responsible for recent price hikes, especially in food and consumer goods.
The Fed Says No
However, Federal Reserve economists disagree. In a recent report, one noted that corporate profits weren’t abnormally high when all factors were considered.
What the Fed Wants
The Federal Reserve’s target for inflation is 2%. Reaching that number or lower could lead to interest rate cuts, which many borrowers are hoping to see. The Federal Reserve consistently raised interest rates in 2022 and 2023.
A Brighter Future
Consumers are obviously worried about increasing costs. Still, it seems rising wages, employment growth, and other positive indicators are making economists hopeful about the country’s future.
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