Inflation is slowing down. Here’s why prices still aren’t going down – NBC 5 Dallas-Fort Worth

  • Historical data shows that a significant factor in lowering prices is the slowdown in consumer spending.
  • Despite nearly half of Americans reporting that they are in a worse financial situation than they were five years ago, they are still spending.
  • Retail sales rose 2.1% year over year in the first quarter of 2024 as consumer spending jumped in February and March.

Jen Luecke, 27, is a recipe developer based in Boston who creates online content that shows people how to eat well On Budget,

“I think it’s no secret that prices are rising pretty much in every area right now,” Luke told CNBC.

Nearly two-thirds, 65%, of American adults Surveys by CNBC/SurveyMonkey this spring say inflation is the main driver of their financial stress. Same share said they are living paycheck to paycheck, Nearly half feel their financial situation is worse than five years ago.

Last January, Luke started a series on social media where he took a grocery list worth between $50 and $75 and turned it into five different recipes for his families. She was inspired to show people that they could still eat well while cutting down on grocery costs.

Zack Staffier for CNBC

Jennifer Luke, 27, creates budget-friendly recipes for her millions of followers on social media.

“It’s really hard. I’m not here to share toxic positivity about how to shop on a budget,” Luke said. “I’m just trying to empower people to feel like they can have a little control, at least in this area of ​​their food costs.”

Deflation, deflation and the ‘money illusion’

“I think Americans get a little confused when they see news that inflation is coming down, and yet they don’t see prices coming down,” said Lindsey Owens, executive director of the Groundwork Collaborative, a nonprofit think tank.

There is an important difference between inflation rising slowly – a phenomenon called deflation – and inflation itself reversing, which would drive prices down. Economists call it the latter deflationWhich is generally associated with a shrinking economy and possible recession.

Historical data shows that prices rise much more easily than they fall. When they decline, it is usually the result of people spending less, which is not the case at present. Retail Sales The first quarter of this year increased by 2.1% year on year consumer spending surged In February and March.

“This cycle is a concept called the money illusion,” says clinical psychologist Sabrina Romanoff.

“People with money illusions… don’t take into account the level of inflation in the economy,” he said. “So they are wrong to believe that a dollar is worth the same amount today as it was a year ago.”

Experts have raised concerns about potential “epicenters of the crisis”. Total credit card balances in the US increased Record high of $1.08 trillion In the third quarter of 2023. Nearly half, 49%, of Americans have credit cards Most say they carry a balance from month to month, according to a November 2023 survey by Bankrate.

Wage growth data may also seem inconsistent with consumer experience. Salary Increasing from January 2022, But the pace of growth is slowing and, on average, it has kept up with rising prices. An analysis from Bankrate estimates the gap between inflation and wages Will not be completely closed until the fourth quarter of 2024,

“For many Americans, a wage increase is long overdue,” Owens said. “In some cases they have gone years, if not decades, with stagnant wages or little raises.”

see Video To learn more about why prices won’t come back down.

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