Why More Americans Are Struggling Even as Inflation Cools

Why prices probably won't fall anymore

Inflation is decreasing, but prices are still high and will likely remain so.

That is generally seen as good news. The economy is growing amid lower price growth and a strong labor market.

But even an overall decline in price increases underscores another bitter reality: we are still paying more for many goods and services, and there is little prospect of improvement.

“Cooling inflation is not the same as a substantial reduction in prices,” says Mark Hamrick, senior economic analyst at Bankrate. “High prices have largely persisted, meaning Americans continue to face affordability challenges on a range of items, both essential and discretionary, including housing, vehicles, auto insurance, food, electricity and travel.”

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The rate at which food prices are rising has indeed slowed.

Monthly “food at home” inflation has been close to 0% for the past four months, according to the latest government inflation data. U.S. gasoline prices fell 3.6% in the month from April to May, and even housing inflation has fallen relative to Highlight more than a year ago.

And yet, because price increases in most cases only taper off and don't completely fall, consumers still see their monthly costs increase, especially when it comes to basic necessities like food, utilities and rent.

According to a recent survey, an average of 61% of Americans say they are spending more money on groceries and dining out than they did a year ago. Wealth Watch Survey by New York Life. Costs in those categories rose by an average of $209.45 per month. Further, 56% of adults said they now spend an average of $161.45 more per month on utilities and 48% said rent costs an average of $302.94 more per month, New York Life found.

At the end of May, the insurance company conducted a survey among 2,002 adults.

'The Toll Inflation Takes on Americans' Finances'

As a result, more consumers are falling behind on their payments. About 8.9% of credit card balances have gone into delinquency over the past year, the New York Fed reported in May. And more middle-income households anticipate wrestling with debt repayments in the coming months.

“We've moved from an environment where inflation was the focus and the impact of rising prices resulted in an affordability crisis, which is now front and center,” Bankrate's Hamrick said.

“However, if prices continue to normalise and the labour market remains stable, further progress can be made on affordability,” he added.

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