With just three weeks to go until the midterm elections, new inflation reports show prices are rising faster than expected, adding more pressure to Americans struggling with the cost of daily necessities. To discuss what the latest data means for Americans, Amna Nawaz spoke with Heather Long, vice president and chief economist at Navy Federal Credit Union.
Jeff Bennett:
With just three weeks to go until the midterm elections, new inflation reports show prices are rising faster than expected, adding more pressure to Americans struggling with the cost of daily necessities.
Amna Nawaz:
Prices have risen 3.7% over the past year, and were up more than 0.5% last month alone. This was the largest monthly increase in five months. Gasoline prices have risen, rising 9% in September.
For more on all this, Heather Long reports. She is vice president and chief economist at Navy Federal Credit Union.
Nice to meet you.
Heather Long, Chief Economist, Navy Federal Credit Union:
It’s great to be here.
Amna Nawaz:
Well, let’s start with the headline data, the consumer price index is up 3.7% from a year ago, which is faster than it was a month ago. How much of that is due to rising gas prices?
Heather Long:
Yes, this is the key question.
Half of this comes from high petrol and diesel prices. But honestly, the reason most people gasp when they see this data today is because the other half comes from everything else. Sure, it spills over into higher airfares and higher home heating oil prices, but the Iran war didn’t lead to higher prices for medical care, dental care, toys, clothing.
I hope no one buys a suit. Those really jumped up. Software price. There are so many items to fix your car and that’s why today is a real wake-up call, this is much more widespread than we thought and will take a long time to alleviate.
Amna Nawaz:
We saw core inflation, which excludes energy and food prices, also edged higher. What does this say to you?
Heather Long:
Yes, it says this is not just a gas and oil problem, but solving it is harder than we expected.
The Fed will have to raise interest rates again. With mortgage rates back above 7.5%, this has become a sore point. That’s the pain that many Americans are feeling, and this is probably the most important data point today, and people are feeling it, with inflation up 3.7% and wages growing just 3%.
Amna Nawaz:
We have discussed before the combination of rising inflation and weak wage growth.
I wanted to hear from two people, Andrew Larcher in South Dakota and Craig Underwood, a farmer in California, about the pressure they’re feeling.
Andrew LarcheR, resident of Sioux Falls, South Dakota:
As a 100% disabled veteran, I am on VA disability services. And, consider, I used to be able to afford stuff easily when I had a month.
Now it’s getting to the point where I have to really pay attention to my budget. How much food can I afford in a month, or how much – or can I pay rent if I buy so much food? Or can I afford a car? I don’t have a car now because I can’t afford one.
Craig Underwood, Fillmore, Calif., resident:
It is difficult to budget for the significant increase in diesel costs. You know, it grinds you down. When I woke up in the morning, I was thinking about this. I was thinking about this when I went to bed at night. Trying to get it out of my brain in order to sleep. But you do think about it a lot.
Amna Nawaz:
Heather, people are obviously feeling this pressure in many ways. Are we seeing consumers reduce or start to significantly reduce their spending?
Heather Long:
The pain right now is absolutely real. Since President Trump took office again, wages have not grown once inflation is taken into account. We’ve seen the pressure, you can hear it in some of these clips.
The bottom 30% have no money to spare, rely on credit cards and start falling behind on payments. The real question is, how long can the middle class survive? It’s amazing how resilient they are, but we’re seeing more and more stories at Navy Federal Credit Union, like the first clip you played, that people are buying less groceries to try to have enough money to pay their other bills.
You can see them trying their best. You get to see them make those hard choices. We think it’s going to be a more tepid holiday season as the hard choices come.
Amna Nawaz:
We should also mention that Social Security benefits will be increasing in January. The cost of living adjustment will increase by approximately 3.6%. The average is about $75 per month. That’s the biggest increase in three years, and there’s still a few months to go.
But what change will it bring, and for whom?
Heather Long:
Well, obviously there are a lot of people who are living on fixed incomes who are struggling right now. But, as you mentioned, 3.6% is the highest level in three years. The hope is that inflation won’t rise significantly from now on.
But the question is, how much relief will we get in 2027? As we have discussed, many areas of the economy are currently experiencing severe inflation. You can’t just use coupons to get out of this situation.
Amna Nawaz:
Heather Long, Vice President and Chief Economist at Navy Federal Credit Union Thank you for being here.
Heather Long:
Thanks.