Cumulative inflation has hit Americans' pocketbooks hard. Mark Zandi, chief economist from Moody, revealed in an analysis that just two years ago, citizens were spending $709 less per month on basic living expenses.
Zandi shared these findings on Twitter (now X), where he reflected optimism regarding the new Consumer Price Index data for the month of July offered by the Bureau of Labor Statistics. The report puts inflation at 3.2%, representing the first month-to-month increase after 12 consecutive months of deceleration.
However, the economist explains that although inflation has cooled in the last year after reaching a maximum of 9.1% in July 2022, Americans continue to face financial problems just to cover their basic expenses due to the "high inflation" that has been accumulating:
To be sure, the high inflation of the past 2+ years has done lots of economic damage. Due to the high inflation, the typical household spent $202 more in a July than they did a year ago to buy the same goods and services. And they spent $709 more than they did 2 years ago.
To be sure, the high inflation of the past 2+ years has done lots of economic damage. Due to the high inflation, the typical household spent $202 more in a July than they did a year ago to buy the same goods and services. And they spent $709 more than they did 2 years ago.
— Mark Zandi (@Markzandi) August 10, 2023
Housing prices driving the increase
Zandi commented to CNN that the increase in spending is largely due to housing prices that have risen sharply. The costs of other goods such as food, vehicles and their insurance, and other recreational services have also increased significantly.
While this increase has been steadily building over the past two years, real consumer earnings, which should adjust to that increase, have stalled, and are currently at the same levels as the last quarter of 2019. According to Zandi:
Real earnings remain below what they would have been if not for the pandemic and the Russian war.
Most Americans live from paycheck to paycheck
Zandi's analysis shows that the percentage of consumers living paycheck to paycheck has been steadily increasing in recent years. In December 2022, some 166 million Americans said their monthly salary was not enough to cover their expenses. The figure is equivalent to 64% of the national population and represented an increase of 3% compared to the 61% reported in December 2021.
Despite the economic data, Zandi's economic predictions are encouraging. According to the economist, inflation will return to the Fed's target next year:
The deeper I dig into last week’s inflation statistics, the more confident I am that inflation will be back to the Fed’s inflation target by this time next year. And this without more interest rate hikes, a recession, or even much of an increase in unemployment.
— Mark Zandi (@Markzandi) August 13, 2023
