Rising Expenses Have Consumers Feeling Pinched

Network News

X Profile
View More Activity
By Nell Henderson, Cecilia Kang and Tomoeh Murakami Tse
Washington Post Staff Writers
Sunday, May 7, 2006

Gas. Food. Shoes.

Sometimes it seems like everything is costing more, said Haydee Rivera, 31, who said she often works 60 hours a week at her job with a fast-food takeout vendor. "For me, it is difficult because I would like to rest, but I can't."

Rivera is spending $60 a week for gasoline, up from about $40 a year ago. Her grocery bills keep climbing, and the shoes for her four boys seem more expensive with every pair.

The Wheaton resident said she saves where she can -- buying fewer new clothes and shoes for herself, avoiding restaurants, relying on her mother for the children's day care. "Then we have more money for food," she said.

Most everybody these days can point to their own list of rising expenses. Electricity, air travel, medical care and even staples such as diapers cost more. Rents are jumping as the housing boom cools, just as property taxes are soaring to reflect the price appreciation of the hotter days.

Plus, interest charges are rising on credit card balances, home-equity lines of credit and adjustable-rate mortgages.

This is how it feels when the days of cheap energy and easy money give way to $70 barrels of oil and ascending interest rates. The economy may be strong, but many people are feeling pinched.

Economists say that feeling overshadows the fact that inflation overall is relatively low -- running at a 3.4 percent annual clip, the same rate as all of last year. The Federal Reserve has been raising interest rates for nearly two years to control inflation, and it is likely to again boost rates this week.

The rate increases were intended to slow a frenzy of consumption that built over the first half of this decade, when government policymakers used tax cuts and low interest rates to prod consumers to keep spending through a recession and the sluggish economic recovery that followed.

Consumers responded enthusiastically, snapping up autos, fueling a housing boom and splurging as a wave of mortgage refinancing turned rapidly appreciating homes into cash machines.

Higher interest rates, energy prices and other expenses are now causing some consumers to rethink their spending habits. So far, many families have been able to absorb the increases without having to tighten their belts much. But others have started to adjust to the new reality.

"We don't save much," said Peter Hays, 45, an airline pilot who said his property taxes have gone up more than $200 a month since he bought his Arlington split-level house five years ago. That forced him to cut back on discretionary spending, such as contributions to the college savings funds for his two small children, he said. "We don't eat out often. We don't vacation. We don't make big plans. We would like to do home improvements, but that's not going to happen."


CONTINUED     1           >

© 2006 The Washington Post Company

Network News

X My Profile
View More Activity