Americans should be more bullish about the economy with the U.S. on the verge of defeating the coronavirus pandemic, but they aren’t. Chalk it up to higher prices for almost everything they buy.
All three major surveys of consumer attitudes took a turn for the worse in May after advancing steadily since the beginning of the year. The latest to show some softening was the index of consumer confidence from the Conference Board.
The new worry? Inflation. Consumer prices soared again in April to push the yearly increase in inflation to a 13-year high of 4.2%.
Concerns about rising prices appear to be on the verge of replacing the deep angst over the deadly coronavirus.
Meat prices jumped 1.5% in April and have risen 4% in the past year. Near-record prices for animal feed such as corn are a chief reason why.
Good luck if you need lumber: Prices have risen through the roof. The cost of a two-by-four, for example, is three to four times more expensive than it was last year.
Higher lumber prices are also adding significantly to the cost of buying a new home or remodeling an existing one.
Need a car to get to work? The average cost of a used vehicle topped $25,000 for the first time earlier this year.
It costs a lot more to fill up the gas tank, too. The average price of regular gasoline nationwide has jumped 50% to just over $3 a gallon from $2 a year ago, according to figures from the federal Energy Information Administration.
The vacation you’ve been dreaming about once the year-long pandemic ended might also be out of reach. Most popular resorts are already booked for the summer and prices are running two to three times higher than usual.
Which explains why consumer confidence actually fell in May even as the U.S. turned the corner on the pandemic.
The number of new coronavirus cases dipped below 20,000 on Monday to the lowest weekday level in almost a year and about half of the population has been vaccinated, signaling even fewer cases in the weeks and months ahead.
“Even though the economy is opening up and one can go mask-free in some areas, and go about your business after a year of being restricted, there is something else to worry about: inflation,” said senior economist Jennifer Lee of BMO Capital Markets.
“Sticker shock from those in the market for a car — assuming you can find one — will do it, along with higher costs for food, cable bills, recreation services, daycare,” she added.
What might be adding to the worry is waning financial assistance from the federal government and a move by half of the 50 U.S. states to cut off extra unemployment benefits for unemployed workers starting in late June.
Whatever the case, the worries aren’t going away soon. Consumers expect sharply higher inflation over the next year, the surveys show.
Even the Federal Reserve, the nation’s guardian against inflation, thinks higher prices will be around for a while though will ultimately prove transitory.
Central bank leaders have insisted for months that prices will subside once the economy returns to normal and pentup demand is satisfied, but they don’t expect the rate of inflation to fall back toward its 2% target until 2022.