A new poll delivered some troubling economic news that could spell trouble for the Democratic Party.
According to a recent survey by the University of Michigan, U.S. consumer sentiment dropped sharply in early July as Americans grow increasingly worried about inflation. A rate that had been expected to rise by 1.5% actually fell by 5.5%.
“Added pressure on living standards”
Inflation has now replaced unemployment as the top economic concern in the poll, which registered consumer confidence at 80.8%. Consumers reported that they were less satisfied with current conditions and less optimistic about the future.
Chief survey economist Richard Curtin explained rising consumer prices have “put added pressure on living standards, especially on lower and middle-income households, and caused postponement of large discretionary purchases.”
The cost of homes, vehicles, and major appliances have all risen in recent months as the Biden administration has pushed for domestic spending bills that have dumped trillions of dollars into the economy following the steep downturn associated with the COVID-19 pandemic.
While many economists initially downplayed the possibility of long-term inflation, a growing number now believe it could last throughout 2023 — especially in the wake of news that interest rates could rise sooner and more steeply than previously thought.
The latest inflation numbers showed an annualized rate of 5.4%, which was the highest since 2008. Notably, that was the same year the federal government last dumped a huge sum of money into the economy to reverse a major economic downturn.
Other contributing factors
Current measures, however, amount to several times as much spending as in 2008, so the impact could be even more severe.
With Biden planning to include trillions more in spending prior to next year’s midterm elections, Republicans could benefit politically from the otherwise distressing economic news.
At least part of the reason for the alarming rate of inflation appears to be actual or artificial shortages that have made it difficult for consumers to purchase the goods they are seeking.
Furthermore, businesses have had a difficult time remaining fully staffed due to a rising retirement rate that coincided with a labor shortage connected to the ongoing pandemic.
Some of these disruptions could be reversed when unemployment benefits return to pre-pandemic levels, but Biden’s big-spending agenda might mean that at least some level of inflation will remain for the long term.