Illustration: Sarah Grillo/Axios. Stock: Getty Images
Americans desperately want day-to-day life to be more affordable. Right now, they aren't getting it.
The big picture: The
pinch of high prices for food, energy, housing and more has driven
seismic shifts in public opinion over the last four years. Since the
onset of the Iran war, the cost of living looks likely to get worse, not
better, at least in the near term.
Energy
prices are surging, interest rates are on the rise, and the stock
market is looking wobbly — a triple whammy for U.S. households.
By the numbers: The
national average for a gallon of gasoline is poised to surpass $4, up
from about $3 a month ago — and is set to rise further the longer the
Strait of Hormuz remains blocked.
Even before the latest energy shock, electricity prices were up 4.8% over the last year, and piped natural gas up 10.9%.
Higher
energy prices will also likely show up in more expensive airfares and
in shipping costs that could ripple through all sorts of goods.
Grocery
prices are up 3.9% over the last year, and Iran's blockade is
throttling the global supply of fertilizer, which could create new
pressures on food prices come harvest season.
Of note: The
impact of higher gasoline prices alone may roughly offset higher
anticipated tax refunds due to last year's One Big, Beautiful Bill Act, per analysis from Stanford economists.
Driving the news: The Organisation for Economic Co-operation and Development this week projected
U.S. inflation will reach 4.2% this year. Before the war, the
international research and policy group had projected 3% U.S. inflation.
That
is lower than the inflation rate reached in 2022, the peak of the
post-pandemic supply chain snarls and the Ukraine war's impact. But 4%+
inflation would come on top of five consecutive years of elevated inflation — consumer prices are up 25% since December 2020.
And
the job market is much weaker now than it was in 2022, with less hiring
and smaller pay increases to help offset higher costs.
It's not
just professional forecasters, either. In the University of Michigan
consumer sentiment survey released Friday, respondents' expectations for
inflation over the next year soared to 3.8% in March from 3.4% in
February.
State of play: Prospects of
higher inflation and higher government borrowing have fueled sell-offs
in stocks and bonds that are simultaneously depleting household wealth and making it more costly to borrow money to buy a home.
The
S&P 500 is down nearly 7% so far this year. Stock market wealth has
helped support overall consumer spending, especially by the affluent.
The U.S. government's borrowing costs have risen about half a percentage point since the start of the war, and home mortgage rates have gone up even more.
A
month ago, the average 30-year fixed-rate mortgage slipped to under 6%
for the first time in three years. Now it's back up to 6.64%.
What they're saying: "Consumers are tired of high prices," Richmond Fed president Tom Barkin said in a speech Friday. "They're deferring purchases, trading down and moving down to lower-priced retailers and private label."
It's
hard to ignore data that "suggests our progress on inflation may be at
risk of stalling," he said. "And that was before the oil price spike —
the latest in a series of cost-increasing supply shocks after the
pandemic, semiconductor chip shortages, the war in Ukraine, tariffs and
immigration enforcement."
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