As inflation continues to bite hard in economies across the globe, it has no doubt disrupted energy markets and food exports, forcing developing countries to pay more on the importation of food products. With countries perturbed over the high inflation rate, the IMF predicts that it will be much felt in developing countries compared to the rich ones.
In the U.S, the inflation rate surged to a new four-decade high in June, because of the rise in the price of gas, food and rent that has affected the disposable income of most households in the country, as well as pressuring the federal reserve to raise interest rates aggressively.
Low-income earners and young people have been the most hit, as a disproportionate share of their income goes toward essentials such as transportation, food and housing. Most Gen Z consumers are falling behind, and are accumulating credit card debt at a pace not witnessed since before the covid-19 pandemic.
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Although, with the cost of so many goods and services rising faster than average incomes, a vast majority of Americans are reported to be feeling the heat in their daily routine. A 72-year old retired pensioner Marcia Freeman who resides in the U.S, described the inflation rate as terrible, stating that there is no escape from rising expenses.
According to her, “Everything goes up, including cheaper items like store brands. Grocery prices have jumped to 12% in the past year, the steepest climb since 1979”.
For months things have been reported to be looking good for U.S consumers as their bank accounts have been padded by government stimulus, student loan forbearance and pandemic-era savings. Bank executives have disclosed that consumers in the U.S have healthy financial cushions and are spending money despite high inflation that has slowed down the economy.
They further revealed that citizens who were mostly able to boost their savings during the covid-19 pandemic are the ones who are financially healthy amid the biting inflation, which is evident by their strong spending and few signs of credit deterioration.
Despite the fact that some people seem to still have their finances stable during this inflation, reports show that U.S consumer spending grew at its lowest pace in two years, as the economy unexpectedly contracted in the second quarter.
The surge in prices of goods/services is forcing consumers in the country to cut back on discretionary spending like Walmart, Tide-Maker Procter & Gamble Co which lowered sales growth forecasts over the past week. One major effect of inflation on the U.S economy is that average credit score has surged as a result of consumers spending less and paying down debt.
Bank of America, which is the second-largest U.S bank by assets, as at the time of filing this report, disclosed that the average credit score of its customers was 771. There has been reported loss of consumers confidence in the economy, as it has greatly declined, so have President Joe Biden approval ratings, posing a major political threat to democrats in the November congressional elections.
About 40 percent of adults in a June poll by AP-NORC disclosed that they thought tackling inflation should be a top government priority this year, Currently, the relentless increase in the price of goods and services is frustrating many Americans.