American households are facing growing financial strain as the cost of everyday essentials continues to climb, outpacing wage growth and eroding purchasing power.
Affordability Crisis ‘Getting Worse’
On Sunday, in a post on X, The Kobeissi Letter, said “basic necessities have never been more unaffordable,” while noting the steep increases in core expenses since February 2020, with grocery prices up 29% to an all-time high and overall food prices rising 30%.
Citing data from Arbor Data Science, the post notes that this rising cost burden extends beyond just the supermarket aisle, with the cost of food away from home surging 33% and transportation services up 36%, leaving families with little room in their budgets.
It also notes that at the same time, the U.S. Dollar’s purchasing power has been dwindling rapidly, alongside a slowing labor market. “The US Dollar has lost nearly 25% of its purchasing power during this time and wage growth has substantially slowed.”
The post concludes by saying that “Affordability is still getting worse,” with the Personal Consumption Expenditures price index last week rising 2.7% year-over-year in August, significantly ahead of the Federal Reserve’s 2% target.
Trump’s Tariffs Are Fueling Inflation
Last week, economists warned that 72% of the Consumer Price Index components are surging ahead of the Fed’s 2% inflation target, driven primarily by President Donald Trump’s trade and tariff policies.
This comes amid the Federal Reserve cutting interest rates by 25 basis points this month, with more cuts expected in October and December, which could add to inflationary pressures.
Early this month, economist Peter Schiff had warned against cutting interest rates in response to a weak jobs report, saying that “Rate cuts now will harm the labor market by weakening the dollar, driving up consumer prices, and pushing long-term interest rates higher.”
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