For drivers filling up their gas tanks or renters signing their monthly checks, inflation has gripped their budgets and shown little sign of letting go.
Millions of Americans drive every day to get to work, school or the grocery store. Rising rents are difficult to avoid, as they’ve gone up nearly everywhere. So if the monthly outlay becomes too high at one place, families cannot easily find someplace cheaper.
With inflation penetrating every part of the economy, Americans are facing tough choices. But in some areas, they appear to have no choice. Here’s why:
The national average for a gallon of gas surged Wednesday to $4.40, the highest price recorded by AAA since it began keeping track in 2000 (though lower when adjusted for inflation than the high-water mark in July 2008, when gas was $5.36 per gallon in today’s dollars). The spike is hitting drivers despite White House efforts earlier this year to create more supply and lower prices.
President Biden’s efforts to curb rising gas prices have been overcome by other factors, primarily the Russian invasion of Ukraine in February, which has sent energy costs soaring. Experts attribute this month’s fuel increases to the European Union’s move to stop all imports of Russian oil by the end of the year. Meanwhile, Biden has ordered the release of a million barrels a day from the Strategic Petroleum Reserve. The administration also has allowed more ethanol into the nation’s fuel supply. But those measures haven’t brought much relief to U.S. consumers as global events take hold.
Adding to the disruptions from the war, oil companies had little incentive to invest in new infrastructure during the early days of the pandemic, when demand for gasoline plunged. What’s more, the U.S. and European governments are poised to transition away from fossil fuels, discouraging the market from increasing drilling capacity. Ramping up production, even in times of crisis, can take much longer than days and weeks.
AAA estimates there are more than 246 million drivers in the United States who are 16 or older, and roughly 9 in 10 drive at least occasionally. The average American made 2.5 trips a day from July 2019 through June 2020. They spent about an hour a day behind the wheel, racking up nearly 30 miles, on average.
Rent costs rose 0.6 percent last month compared with March, part of a staggering climb that has had an outsize role in driving inflation and squeezing household budgets. Shelter accounts for about one-third of the basket of goods and services that shape the consumer price index, the snapshot of price changes over time. Overall inflation is unlikely to return to more typical levels until housing costs ease.
If the price of a steak goes up, Americans can avoid buying steak. But if the cost of renting an apartment goes up, they have few options for avoiding it.
Analysts point to an extreme mismatch between housing supplies and the number of people looking for an affordable place to live as a key driver in rising rents. Rents jumped more than 5 percent compared with last year, according to the April data. In some areas, those costs have climbed nearly 40 percent over the past two years. The lack of affordable rentals may even worsen as mortgage rates increase, because more Americans will be priced out of homeownership and be steered into an already competitive rental market. The economic shocks of the pandemic also continue to reverberate. Construction delays and materials shortages have hampered the ability of developers to build new homes and rentals, further constraining the supply of affordable housing.
Why are these price increases harder to avoid than others?
Even though wages have risen, they’re not keeping up with the price increases now eating into family budgets. And while spending on cars and travel generally can be delayed, most consumers can’t put off gas and rent.
For the third consecutive month, prices for used cars and trucks saw a decline, signaling a potential break in peak prices that buyers saw earlier this year. The index for used cars and trucks fell 0.4 percent in April. Still, even edging down from record price levels, automobile dealers expect strong demand as factories wrestle with supply chain disruptions and depleted inventory.
The cost of airfare, meanwhile, has risen sharply as some Americans who put off vacations during the first two years of the pandemic book “revenge travel.” Prices increased almost 19 percent last month. The index for airline fares rose more than 33 percent compared with a year ago, notching the largest 12-month increase since 1980.
Is there any relief on the horizon?
A new batch of federal data released Wednesday may give consumers and policymakers some hope that soaring prices could be starting to slow, even though inflation remains painfully high for many households.
The price growth of goods and services receded in April compared with the previous month, according to the latest figures from the Bureau of Labor Statistics. March prices, for instance, rose 8.5 percent compared with the previous year, and 1.2 percent vs. February. Those numbers were slightly lower in April, the latest data shows, rising by 8.3 percent compared with a year ago and 0.3 percent compared with the month before. That may signal potential easing.
Biden has pledged to redouble his efforts to reduce the burden of rising prices on average Americans. His plans to help combat inflation include increasing taxes on the ultrawealthy, expanding the Affordable Care Act, and boosting investments in clean energy and transit.