Evelyn Reynolds

Headline CPI in March rose by 8.5% from a year ago, the fastest annual gain since December 1981 and one-tenth of a percentage point above the estimate.
Surging food, energy and shelter costs helped account for the gain.
Real worker earnings fell by another 0.8% during the month as the cost of living outpaced otherwise strong pay gains.

Prices that consumers pay on everyday items surged in March to their highest levels since the early days of the Reagan administration, according to Labor Department data released Tuesday.
The consumer price index, which measures a wide-ranging basket of goods and services, jumped 8.5% from a year ago on an unadjusted basis, above even the already elevated Dow Jones estimate for 8.4%.

Excluding food and energy, the CPI increased 6.5%, in line with the expectation.
The data reflected price increases not seen in the U.S. since the stagflation days of the late 1970s and early ’80s. March’s headline reading in fact was the highest since December 1981. Core inflation was the hottest since August 1982.
However, core inflation appeared to be ebbing, rising 0.3% for the month, less than the 0.5% estimate.
Despite the increases, markets reacted positively to the report. Stock market futures rose and government bond yields declined.
“The big news in the March report was that core price pressures finally appear to be moderating,” wrote Andrew Hunter, senior U.S. economist at Capital Economics. Hunter said he thinks the March increase will “mark the peak” for inflation as year-over-year comparisons drive the numbers lower and energy prices subside.

Still, due to the surge in inflation, real earnings, despite rising 5.6% from a year ago, still weren’t keeping pace with the cost of living. Real average hourly earnings posted a seasonally adjusted 0.8% decline for the month, according to a separate Bureau of Labor Statistics report.
The inability of wages to keep up with costs could add to inflation pressures.
The Atlanta Federal Reserve wage tracker for March indicated gains of another 6% which is “symptomatic of inflation pressures continuing to broaden,” said Brian Coulton, chief economist at Fitch Ratings. Coulton pointed out that the core inflation deceleration was due largely to a drop in auto prices, while other prices continued to show increases.
Shelter costs, which make up about one-third of the CPI weighting, increased another 0.5% on the month, making the 12-month gain a blistering 5%, the highest since May 1991.
To combat inflation, the Federal Reserve has begun raising interest rates and is expected to continue doing so through the remainder of the year and into 2023. The last time prices were this high, the Fed raised its benchmark rate to nearly 20%, pulling the economy into a recession that finally defeated inflation.
Economists generally don’t expect a recession this time around, though many on Wall Street are raising the probability of a downturn.
“Overall, this report is encouraging, at the margin, though it is far too soon to be sure that the next few core prints will be as low; much depends on the path of used vehicle prices, which is very hard to forecast with confidence,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics. “We’re sure they will fall, but the speed of the decline is what matters.”
Price increases came from many of the usual culprits.
Food rose 1% for the month and 8.8% over the year, as prices for goods such as rice, ground beef, citrus fruits and fresh vegetables all posted gains of more than 2% in March. Energy prices were up 11% and 32% respectively as gasoline prices popped 18.3% for the month, boosted by the war in Ukraine and the pressure it is exerting on supply.
One sector that has been a major driver in the inflation burst subsided in March. Used car and truck prices declined 3.8% for the month, though they are still up 35.3% on the year. Also, commodity prices excluding food and energy fell by 0.4%.
Those declines, however, were offset by gains in clothing, services excluding energy and medical care, each of which increased 0.6% for the month. Transportation services also rose 2%, bringing its 12-month gain to 7.7%.
In a sign of economic recovery from a sector hard-hit during the pandemic, airline fares jumped by 10.7% in the month and were up 23.6% from a year ago.

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Economists expect inflation rose 1.1% in March from the prior month, but the year-over-year gain is expected to be 8.4%, the highest since December 1981.
The consumer price index will be reported Tuesday at 8:30 a.m. ET.
The main culprits behind the jump in headline inflation were food and energy, but the cost of housing has continued to rise.
“It’s going to be ugly,” said one economist of the March report. “It’s a perfect storm.”

A customer selects food from a freezer at a supermarket on January 12, 2022 in New York City.
Liao Pan | China News Service | Getty Images

Consumer price inflation in March is expected to have spiked the most since December 1981, driven by higher food costs, rising rents and runaway energy prices.
The consumer price index will be released Tuesday at 8:30 a.m. ET, and economists expect a monthly jump of 1.1% and a year-over-year gain of 8.4%, according to Dow Jones. That compares with February’s increase of 0.8%, or 7.9% year over year, the highest since early 1982.

“It’s going to be ugly,” said Mark Zandi, chief economist at Moody’s Analytics. “It’s a perfect storm — Russian invasion, surging oil prices, China locking down, further disruptions to supply chains, wage growth accelerating, unfilled positions. Just a kind of scrambled mess leading to painfully high inflation. We’re struggling through two massive global supply shocks. It would be hard to imagine we didn’t suffer higher inflation.”
Core inflation, excluding food and energy, is expected to rise a half percent — the same as February — with a year-over-year gain of 6.6%, up from 6.4%, according to Dow Jones.
“The good news is it does look like it will be the peak because of oil prices,” said Diane Swonk, chief economist at Grant Thornton. Oil prices surged shortly after Russia invaded Ukraine in late February, reaching a high for West Texas Intermediate oil futures of $130.50 per barrel in early March. That price has fallen to about $94 per barrel Monday.
Gasoline prices also surged, reaching a national average of $4.33 per gallon of unleaded on March 11, according to AAA. That price Monday was $4.11 per gallon.
“The problem for the Fed is the broadening of inflation from goods into services and also because used car prices might be picking up again,” said Swonk. “The supply chain issues aren’t going away. They’re getting worse.”

Just on base effects, economists say this month or next month could be the peak for inflation. Zandi projects headline CPI will fall to 4.9% by the end of this year.
The Federal Reserve is expected to tighten policy aggressively to rein in the hottest inflation in four decades. Markets expect a half-point hike in May, and economists say a hot inflation report could also bring a half-point hike in June.
“The Fed’s on track. It’s at least a half-percent hike, and the balance sheet reductions starting out,” he said.

The Fed first raised interest rates by a quarter point in March, after cutting the fed funds target rate to zero in early 2020.
Tom Simons, money market economist at Jefferies, expects to see the Fed raise rates by 50 basis points at its May 3 meeting, and he said the CPI should not change that. “If it comes in dramatically higher than expected, which I don’t think it will, it’s going to start talk of a 75-basis-point hike, or an intermeeting hike,” he said. “That’s pretty much nonsense in my opinion.” A basis point equals 0.01%.
Simons said energy prices in CPI are expected to jump 18% in March. “That first half of March was particularly acute post-Russian invasion. Food prices are a similar story but not nearly to the same extent. … Housing again is going to be a pretty significant factor,” he said.
He expects owners’ equivalent rent, or the cost of a home in CPI, to rise about 0.5%, while rents should rise 0.6% month over month. Shelter costs are one area that is expected to keep rising. That would put shelter, which is a third of CPI, up 4.6% year over year.
Swonk said the increases to shelter costs are the highest since early 1990, and they could continue to rise. “I think there’s a risk it comes in on the hot side,” she said.

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The Biden administration is bracing for the Labor Department’s consumer price index report to show that inflation is “extraordinarily elevated.”
The consumer price index, or CPI, is one of Wall Street’s favorite ways to measure inflation. The CPI reading for March 2022 is due out Tuesday morning.
“We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike,” said White House press secretary Jen Psaki.
The February reading showed the benchmark index rose 7.9% over the last 12 months, the highest level since 1982.

White House press secretary Jen Psaki answers questions during the daily briefing on March 09, 2022 in Washington, DC. Psaki answered a range of questions related primarily to Russia’s invasion of Ukraine.
Win Mcnamee | Getty Images

WASHINGTON — The Biden administration is bracing for Tuesday’s key consumer inflation report to show that the prices Americans pay soared in March, as Russia’s assault on Ukraine caused energy prices to jump.
White House press secretary Jen Psaki said Monday that the Labor Department’s previous report — which showed prices rising at a dramatic rate in February — failed to include the majority of the jump in oil and gas costs caused by the Kremlin’s unprovoked invasion.

“We expect March CPI headline inflation to be extraordinarily elevated due to Putin’s price hike,” Psaki told reporters.

“We expect a large difference between core and headline inflation,” she continued, “reflecting the global disruptions in energy and food markets.”
The Bureau of Labor Statistics on Tuesday will issue its March update to the consumer price index, or CPI. The CPI is the department’s tool for measuring inflation in a basket of goods and services that the average American would buy — ranging from eggs and milk to cellphones and unleaded gasoline.
Economists consider two versions of the CPI data: The headline number that includes all prices consumers face, and a so-called core CPI that excludes often volatile food and energy price fluctuations.
The White House says it anticipates a wider-than-normal disparity between the headline and core readings because of an abnormal increase in gas prices that occurred last month. The price for a gallon of regular unleaded gasoline hit a record high of $4.33 on March 11, according to the American Automobile Association.

That price has since slid to $4.11 a gallon, according to AAA.
“At times, gas prices were more than one dollar above pre-invasion levels, so that roughly 25% increase in gas prices will drive tomorrow’s inflation reading,” Psaki said.
Labor Department data has for several months shown that year-over-year price jumps have been hitting levels not seen since Ronald Reagan was in the Oval Office. The February reading showed benchmark consumer inflation index rose 7.9% over the last 12 months, the highest level since January 1982.
The March report is due out on Tuesday at 8:30 a.m. ET.
The press secretary noted that President Joe Biden has taken several steps to help lower energy costs, including a move to release about 1 million barrels of oil a day from the nation’s Strategic Petroleum Reserve.

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On the final day of March, Biden blamed Russian President Vladimir Putin for the most recent spike in energy costs.
“Many people are no longer buying Russian oil around the world. I banned Russian-imported oil here in America, Republicans and Democrats in Congress called for it and support it. It was the right thing to do,” Biden said on March 31.
“But as I said at the time, it’s going to come with a cost,” the president added. “As Russian oil comes off the global market, supply of oil drops and prices are rising. Now Putin’s price hike is hitting Americans at the pump.”
Stalled legislation — key components of the president’s Build Back Better agenda — backed by the White House and congressional Democrats could also help cut child-care and health-care costs, Psaki added.

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Few areas of the country have seen inflation as bad as in the South, where prices have risen across the 16-state region by an average of 8.4% from a year ago.
But prices aren’t the only thing heating up in the South and West, as Georgia and Arizona voters find themselves in a fierce 2022 midterm election cycle.
Some residents say rising food, gasoline and housing costs are likely to play a factor in how they vote later this year.
The Labor Department’s March 2022 CPI consumer price report is due out Tuesday at 8:30 a.m. ET.

Republican activists seek drivers’ attention as they work to register voters to their party at a gas station in Garden Grove, California, U.S., March 29, 2022. 
Mike Blake | Reuters

Matthew Rice doesn’t have to look hard for signs of inflation in Savannah, Georgia.
A gallon of gas cost $2.79 a few months ago, he said. Now it runs him more than $4.

“And, of course, when the price of gas goes up, the price of products goes up,” the 45-year-old added. “So yeah. It’s played a role in our household.”
Rice, a longtime fan of MLB’s Atlanta Braves and a graduate of Armstrong State University, now known as Georgia Southern University, is one of the tens of thousands of Americans who say rising prices are straining their household budgets and shaping how they think about this year’s elections.
Gradual but steady jumps in the costs of groceries, housing and gas have forced consumers like Rice, who manages reservations for an RV park on nearby Tybee Island, to change how they spend money.
While his work has been busy as more Americans take long-delayed vacations following Covid pandemic-era shutdowns, Rice said inflation has made him choosier when he, his mother and 10-year-old daughter shop for groceries every other Friday.

People shop in a store in Brooklyn on March 10, 2022 in New York City. The price of gas, food, cars and other items has hit a 40 year high as inflation continues to rise in America.
Spencer Platt | Getty Images

“We have, at times, made substitutions based off what’s available because of the supply chain,” he said. “And at times, due to the price, we maybe try other brands of products that we normally would not have tried before.”

Few areas of the country have seen inflation as bad as in the South, where prices have risen across the 16-state region by an average of 8.4% from a year ago. That compares with year-over-year inflation of 8% in the Midwest, 8.1% in the West and 6.6% in the Northeast, according to the Bureau of Labor Statistics.
Inflation is particularly bad in Tampa, Florida, Miami and Atlanta where consumer prices have jumped by an average of 9.6%, 9.8% and a whopping 10.6%, respectively, over the last year.
But prices aren’t the only thing heating up in the South and West, as Georgia again finds itself in the middle of a fierce election cycle. Inflation has vaulted to the top of the minds of both voters and candidates across the state.
At the federal level, several Republicans hope to unseat Democratic Sen. Raphael Warnock, who defeated Republican Kelly Loeffler in a special election in 2020. Loeffler was appointed in 2019 by Republican Gov. Brian Kemp to finish the term of former GOP Sen. Johnny Isakson, who resigned for health reasons.
Warnock is Georgia’s first Black senator, and his win gave Democrats a razor-thin majority in the Senate.

Republican Senators David Perdue and Kelly Loeffler look on ahead of U.S. President Donald Trump hosting a campaign event with Perdue and Loeffler at Valdosta Regional Airport in Valdosta, Georgia, U.S., December 5, 2020.
Dustin Chambers | Reuters

Meanwhile, the state’s gubernatorial race pits Kemp against fellow Republican and former Sen. David Perdue, who’s been endorsed by former President Donald Trump.
In an already bitter primary competition, Perdue hopes to tap into Georgia Republicans’ frustrations with Kemp after the governor refused to overturn the 2020 election results that favored then-candidate Joe Biden. Trump falsely claimed widespread fraud led to Biden’s win, and asked the state’s top elections official to “find” enough votes for him to reverse his loss.
The GOP winner is all but certain to face another tough challenger in the November general election from Democratic candidate Stacey Abrams, who narrowly lost the 2018 governor’s race to Kemp.
But as different as Georgia’s candidates and elections are, voters are unified by their shared fatigue over rising sticker prices for gasoline, groceries and housing.
For the past several months, Labor Department data has shown that year-over-year price jumps have been hitting levels not seen since the Ronald Reagan administration. In its most recent update last month, the department said its benchmark consumer inflation index rose 7.9% over the last 12 months, the hottest reading since January 1982.
The Labor Department’s March 2022 consumer price report is due out on Tuesday at 8:30 a.m. ET.
Those familiar with the White House’s thinking say the administration expects to see a hot headline March CPI figure given that the prior print failed to fully capture a dramatic uptick in petroleum prices caused by Russia’s invasion of Ukraine that began in late February.
The CPI, or consumer price index, is the department’s tool for measuring the price changes of a basket of goods and services that everyday Americans buy each month.
Core inflation, which excludes volatile energy prices, could be more modest by comparison in the March report.

The Federal Reserve, the U.S. central bank tasked with keeping prices stable, considers inflation around 2% a healthy byproduct of economic growth. But too much can signal overheating and a disconnect between the economy’s broadest forces of supply and demand.
For consumers, unruly inflation can erode what economists call purchasing power, or the total quantity of goods and services they can buy at their current income.
But as fast as prices rise in Savannah, Rice said some grocery purchases aren’t up for debate.
“We try not to make too many adjustments because my daughter — she likes certain brands,” he laughed, saying they can’t substitute cheaper brands for Kraft Macaroni & Cheese or Quaker Oats’ Peaches & Cream flavored instant oatmeal among his daughter’s favorites. “Kids usually have a certain taste.”

Inflation nation

Economists say the country’s inflation woes began in the spring of 2021 as Covid vaccines arrived and then was exacerbated by a variety of seemingly unrelated factors.
The inoculations stoked demand for all the things consumers gave up to stay safe during the worst of the pandemic — travel and dining out. Demand also surged for new cars, paid for in part with all the money saved by staying in for months.
Factory shutdowns during the pandemic left automakers like Ford and General Motors behind on production. The surge in demand, combined with a shortage of computer chips, further reduced vehicle inventory and sent prices soaring on cars and electronics.

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Labor shortages — due in part to people calling out sick with Covid or quarantining because of an exposure — led to freight backlogs at the ports of Los Angeles and Long Beach, California, and higher shipping costs that were passed on to consumers.
Russia’s invasion of Ukraine has sent oil prices spiking, and soaring real estate values have driven up the cost of housing.
Caroline Fohlin, an economics professor at Emory University in Atlanta, said Arizona and Georgia are both seeing steep home price jumps as people leave the country’s largest cities for cheaper locales. The pandemic opened up the prospects of working from home — from anywhere — for city dwellers who could buy expansive homes with yards for the cost of a one-bedroom apartment in New York or San Francisco.
Online listing website Apartment List shows that Atlanta rents climbed by about 18% over 2021, with the average per-month cost for a one-bedroom apartment at $1,831.
“They’re moving in droves to places like Savannah, Charleston – you know, the coastal South,” Fohlin said. “Take a look at the real estate market in, say, Sullivan’s Island, South Carolina” where “shacks” are selling for millions.
“That’s great news for the old-timers who are able to sell their previously $50,000 shacks for $3 million,” she said.

A “for sale” sign in front of a home that Zillow shows has a pending sale of 750,000 dollars on February 18, 2022 in Miami, Florida.
Joe Raedle | Getty Images

Roger Ferguson, former vice chair of the Federal Reserve, attributed most of the rise in consumer prices in Georgia and Arizona to the increase in housing costs.
“There might be some differences in terms of your labor force, compensation composition,” Ferguson, a CNBC contributor, said last month. “But my hypothesis is that it’s primarily around housing.”
In New York City, where renters comprise about 67% of all households, the average rent for a one-bedroom apartment fell from about $1,920 per month in February 2020 to $1,510 by January 2021 as residents fled congested cities, according to Apartment List.
Rents have more than rebounded since then as bosses increasingly insist on workers returning to their offices. The monthly cost of a one-bedroom apartment in New York City is now around $2,068.

Politics of prices

The mismatch between supply and demand, and the resulting inflation, has blossomed into a critical issue for Biden and Democrats hoping to retain control of Congress this year.
Nearly 1 in 5 Americans, 17%, said in March that inflation is the most important problem facing the U.S., according to polling site Gallup. That figure represents a 7 percentage point climb from the 10% of Americans who in February said inflation was the country’s chief headache.

Gasoline fuel prices above five dollars a gallon are displayed at a Shell gas station in the Chinatown neighborhood of Los Angeles, California, on February 17, 2022.
Patrick T. Fallon | AFP | Getty Images

As inflation has climbed, Biden’s polling has fallen: Just 36% of those surveyed by Gallup in a recent poll say they approve of his handling of the economy, down from 54% in February 2021.
Republicans hoping to win back control of Congress have seized on rising prices as evidence of economic mismanagement and frivolous spending by Democrats, who control the White House and both chambers of Congress. They have focused on the $1.9 trillion American Rescue Plan, the Democratic coronavirus relief law passed in March 2021, as vaccines were starting to boost demand in the U.S.
One such Republican is former pro football player Herschel Walker, who’s running against Warnock in Georgia’s Senate race.

Former college football star and current senatorial candidate Herschel Walker speaks at a rally, as former U.S. President Donald Trump applauds, in Perry, Georgia, U.S. September 25, 2021.
Dustin Chambers | Reuters

Walker, a longtime Trump ally, echoed the frustrations of many Georgia Republicans earlier this year when he shared on Twitter an image of a near-barren grocery store shelf and blamed Democrats’ economic agenda for the frothy inflation.
“Our shelves are empty, the supply chain is a mess, and inflation is at the HIGHEST in 40 years,” Walker wrote in a Jan. 19 Twitter post. “President Biden’s approval ratings continue to drop. Why is he focused on social spending? People just want affordable gas and groceries on the shelves!”
Democrats attribute the price spikes to a combination of overwhelmed supply chains, the war in Ukraine, labor shortages and unprecedented demand. Warnock specifically has met opponents’ inflation barbs by blaming corporate profiteering.
“While corporations are seeing record profits, Georgia consumers are seeing record prices,” Warnock said in a Twitter post from February. “Whether it’s working to ease supply chain issues, or capping out-of-pocket costs for prescription drugs, I’m fighting for hardworking Georgians every day.”

Heating up in Arizona

Across the country in Arizona, prices have also affected consumer spending — and the political landscape.
Aaron Spector, a 28-year-old Tempe resident, said his landlord’s move to hike rent by nearly 20% led him to make some changes — he bought his own home.
“Honestly, it just didn’t make sense to rent anymore with the increase that I was seeing,” Spector, who works in sales for a logistics firm, told CNBC. “I did want to buy a house – it was on the timeline. But it was definitely expedited – almost necessary – when I saw what the rent was increasing to.”
In nearby Phoenix, Kevin McElwain said signs of housing cost hikes are everywhere.
McElwain, who works sourcing labor and materials for homebuilders, said more expensive raw materials are fueling prices for new homes.
“Anything from framing, concrete, electrical – you name it. Prices have risen probably by at least 50%,” he said. A lot of the problem, he explained, comes from shortages of supply for workers and raw commodities.
“You have people that will turn down bids for new projects because either they don’t have the necessary parts and materials, or they don’t have the crews,” McElwain, 29, said.

Stacks of lumber are offered for sale at a home center on April 05, 2021 in Chicago, Illinois.
Scott Olson | Getty Images

Those shortages are likely a main culprit in Phoenix’s high prices, which have risen 10.9% over the last 12 months. Over the last year in the city, meat prices have jumped 16.2%, clothing costs have climbed 15.5% and restaurant bills are up 5.9%.
Spector said that inflation, and the state of the economy more broadly, will influence him at the ballot box come Election Day.
“It will definitely impact how I vote,” the graduate of the State University of New York at Geneseo said. “It will obviously have an impact. When people’s bank accounts are affected like this, it changes people’s minds.”
Phoenix resident McElwain, who said he’s not registered to vote with either party, said inflation is on his mind this election year.
“I’d like to see it be addressed by the candidates that are running,” he continued. “But I’m still going to take everything that they have to say with a grain of salt one way or the other.”

Sen. Mark Kelly, D-Ariz., conducts a news conference outside the Capitol to discuss the Military Justice Improvement and Increasing Prevention Act, which would remove serious crime prosecution out of the chain of command, on Thursday, April 29, 2021.
Tom Williams | CQ-Roll Call, Inc. | Getty Images

Votes from McElwain and Spector this fall will help determine whether Democratic Sen. Mark Kelly will hold on to the seat he won in Arizona’s 2020 special election against then-GOP incumbent Martha McSally to finish out the remainder of former Sen. John McCain’s term.
Like Warnock, Kelly has tried to convince voters that he and his fellow Democrats are working to check unruly prices.
The retired astronaut in March detailed “6 Things” he is doing to try to cool inflation in Arizona. Those efforts include a bill to suspend the federal gas tax for the rest of 2022, his contributions to the CHIPS semiconductor bill and a deal to cap out-of-pocket prescription costs for seniors.
“We’re in the middle of a global microchip shortage that’s driving up prices on everything from cars to appliances,” Kelly said in a Twitter post April 2. “Our bill to boost U.S. microchip manufacturing will help end that shortage, create thousands of high-paying jobs for Arizonans, and grow our state’s economy.”
The strain soaring inflation has put on Americans — and the anxiety it has caused incumbents running this fall — has shown up repeatedly in the policy choices made by swing-state lawmakers this year. On Thursday, Senate Majority Leader Chuck Schumer, D-N.Y., named both Kelly and Warnock to a conference committee that will hash out a final microchip bill with House members.
Both senators have also tried to show voters they can address an issue that has vexed Rice in Georgia and people across the U.S.: high gas prices. Kelly and Warnock co-sponsored legislation that would suspend the U.S. gas tax for the rest of the year. The bill has not moved forward since senators unveiled it in February.
“This bill will lower gas prices by suspending the federal gas tax through the end of the year to help Arizona families struggling with high costs for everything from gas to groceries,” Kelly said in a statement at the time.
Warnock added in his own statement: “Hardworking Georgians being squeezed at the pump understand that every penny counts.”
Correction: Quaker Oats has a Peaches & Cream flavored instant oatmeal. An earlier version misstated the name of the product.

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Moyo Studio | E+ | Getty Images

As the coronavirus pandemic wears on and government aid sent at the beginning of the crisis runs out, Americans are feeling the impact of tight budgets.
One-quarter of Americans said that they felt financially stressed all the time last year, according to a CNBC + Acorns Invest in You survey, conducted by Momentive. The online survey of nearly 4,000 adults was conducted March 23-24.  

Another 41% said they feel financially stressed sometimes, and 33% said they felt rarely or never financially stressed in the last year.
More from Invest in You:Inflation could mean a big heating bill this winter. How to prepareAs inflation rises, where to find opportunities to make and save moneyYour financial wrap-up: 4 savvy money moves to make before year-end
The main cause of financial stress has been rising prices, as Americans grapple with the highest inflation in 40 years. Many people were unprepared to deal with these price hikes, said Susan Greenhalgh, an accredited financial counselor who runs Mind Your Money in Hope, Rhode Island.
“We don’t really know how to deal with them, and how to address them,” she said, adding that having your eyes focused on your spending is always a good strategy.
Shifting the budget
Financial stress appears to be hitting those with lower incomes the hardest.

Nearly 60% of people who had a household income of less than $50,000 said they’re under more financial stress now than they were a year ago, the survey found.
That’s compared with 53% of people in households making between $50,000 and $100,000 annually and 45% of people making more than $100,000 who said the same thing.

Those who are struggling the most may have to make some serious choices with their finances, said Tania Brown, an Atlanta-based certified financial planner and founder of FinanciallyConfidentMom.com. She recommends prioritizing the essentials before anything else — that includes, rent, food, utilities and basic medical expenses.
“In this environment, legitimately other bills may have to go by the wayside,” she said. “Depending on your income, you’re fighting just to keep your home.”
She also suggested reaching out to creditors for help and looking for programs that may lower the cost of utilities depending on income. It may also be a time to look at other monthly expenses and subscriptions to see what can be reduced or cut, including the cost of internet or cable.

You have to be a lot more proactive in reviewing your budget.

Tania Brown
founder of FinanciallyConfidentMom.com

There are also a few ways to find deals on gas, such as using GasBuddy, carpooling or scheduling errands all at once to avoid making multiple trips.
People can also make other changes to bring down bills, such as using heat and air conditioning less, or opting for meals without meat.
In addition, if a family must dip into their emergency savings to stay afloat right now, Brown said they shouldn’t feel bad — the point of having such an account is for such situations.
“You’re using it as intended,” she said.
Prices may keep rising

To be sure, most Americans aren’t feeling as stressed all the time about the pressures of inflation. Still, they might be in a very different financial situation now due to rising prices — some 52% said they’re under more financial stress now than they were a year ago.
Because the cost of goods is likely to continue to rise in the short term, people should be checking in with their budgets on a more frequent basis because of how quickly prices are changing, said Brown.
“You have to be a lot more proactive in reviewing your budget and actually looking at what you spent last month because the numbers may change,” she said. “Give yourself a lot more wiggle room.”
That may mean saving less for a few months, rethinking your short-term financial goals or even looking for a raise or a job that will pay you more.
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A motorist pumps gas at a Valero station along Encinitas Blvd in Encinitas, CA on Tuesday, April 5, 2022.
Sandy Huffaker | The Washington Post | Getty Images

Worries are increasing over inflation, with new Federal Reserve data showing a record-high fear over surging prices.
Consumers now see inflation hitting 6.6% over the next year, according to the New York Fed’s survey in March, released Monday. That’s a 10% increase in the median expectation just over the past month and the highest level in a series that dates to 2013.

The survey showed that median expectations over a three-year span actually decreased by 0.1 percentage point to 3.7%, largely due to a declining outlook from those with annual household incomes below $50,000.
However, uncertainty about inflation over both the one- and three-year spans showed record highs.
Household spending expectations rose sharply, climbing 1.3 percentage points to 7.7%, also a new series high.
The data comes a day before the release of the March consumer price index, which is expected to show prices rising at an 8.4% pace over the past 12 months, according to Dow Jones estimates. If that forecast is accurate, it would be the highest number since December 1981.
To fight inflation, the Fed last month approved its first interest rate hike in more than three years. Additional increases are expected throughout the year as inflation runs well above the central bank’s longstanding target of 2%.

Consumers see the fastest increases coming from rent (10.2%), which accounts for about one-third of the CPI. Medical care, food and gasoline are expected to jump by 9.6%. The outlook for college costs decreased by 0.5 percentage point to 8.5%.
Anticipated wage gains held steady at 3%, while 36.2% said they think the unemployment rate will increase over the next year, the highest level since February 2021. Unemployment is currently at 3.6%, just above where it was prior to the Covid pandemic though labor force participation remains 1 percentage point lower.
Anxiety increased slightly over job stability, with the probability of losing one’s job over the next year rising to 11.1%, a 0.3 percentage point gain that is still well below the 13.8% pre-pandemic level.

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Economists are betting that supply chains for all kinds of goods will heal, shortages will ease and price gains will slow. Cars are a wild card in those forecasts.Corina Diehl is eager for more sedans and pickup trucks to sell her customers in and around the Pittsburgh area, but as the pandemic enters its third year, cars remain in short supply and the squeeze on inventory shows no sign of abating.“If I could get 100 Toyotas today, I would sell 100 Toyotas today,” Ms. Diehl said. Instead, she said, she’s lucky to have three. “It’s the same with every brand I have.”Dealerships like Ms. Diehl’s are wrestling with inventory shortages — the result of a dearth of computer chips, production disruptions and other supply chain snarls. That’s not a problem just for car buyers, who are paying more; it’s also a problem for economic policymakers as they try to wrestle the fastest inflation in four decades under control.Car prices have helped push inflation sharply higher over the past year, and economists have been counting on them to level off and even decline in 2022, allowing the rising Consumer Price Index to moderate markedly.Rapid Car Inflation Year-over-year change in select automotive categories of the Consumer Price Index

Source: Bureau of Labor Statistics, accessed via FREDBy The New York TimesBut it is increasingly unclear how much and how quickly car prices will slow their ascent, because of repeated setbacks that threaten to keep the market under pressure. While price increases are showing some early signs of slowing and used car costs, in particular, are unlikely to climb at the same breakneck pace as last year, continued shortfalls of new vehicles could keep prices elevated — even rising — longer than many economists expected.“We’ve stumbled into another pattern of a series of unfortunate events,” said Jonathan Smoke, the chief economist at Cox Automotive, an industry consulting firm. Shutdowns meant to contain the coronavirus in China, computer chip factory disruptions tied to a recent earthquake in Japan, the aftereffects of the trucker strike in Canada and the war in Ukraine are adding up to slow production.Mr. Smoke expects new car prices to keep rising this year — perhaps even at nearly the same pace as last year — and used cars to begin to depreciate again, but said the shortage of new cars could spill over to blunt that weakening. And used cars may not fall in price at all if rental companies begin to snap them up as they did in 2021.“If the supply situation gets worse, it’s still possible that we repeat some of what we had last year,” he said.Mr. Smoke’s predictions — and worries — are more grim than what many economists are penciling into their forecasts.Alan Detmeister, a senior economist at UBS and former chief of the Federal Reserve Board’s wages and prices section, said he expected a 15 percent decline in used car prices by the end of the year, with new car prices falling 2.5 to 3 percent.Those estimates are predicated on an increase in supply.“This is a huge wild card in the forecast,” Mr. Detmeister said. But even if production doesn’t pick up, “it is extremely unlikely that we’ll see the kind of increases we saw last year,” he added, referring to prices.Omair Sharif, founder of Inflation Insights, a research firm, said he was still expecting improved supply and slower demand to help the used car market come into balance. While used car prices may rise for a few months as households spend tax refunds on automobiles, he expects the increase to be modest in part because they already nearly match new car prices.“I would be shocked if the used car market really accelerated,” he said. New car prices are a more complicated story, he added: “There, we have legitimately serious inventory problems.”Automakers are struggling to ramp up production. Russia’s invasion of Ukraine has created shortages in electrical components needed for cars, prompting S&P Global Mobility to cut its 2022 and 2023 forecasts for U.S. production. More critically, the chips needed to power everything from dashboards to diagnostics remain in short supply. Ford Motor and General Motors temporarily shut down some U.S. factories last week because of supply issues, and the industry broadly cannot ship as many cars as customers want to buy.In cars, “production remains below prepandemic levels, and an expected sharp decline in prices has been repeatedly postponed,” Jerome H. Powell, the Fed chair, said during a speech last month. He noted that while supply chain relief in general seemed likely to come over time, the timing and scope were uncertain.Cars loaded in Kansas City, Kan., for transport to a dealership in Wichita, Kan. Automakers are struggling to ramp up production as repeated shocks rock the industry.Chase Castor for The New York TimesAnalysts had been hoping that chip shortages, in particular, would ease up, but “we’ve got at least another year, if not more,” for the supply chain to heal, said Chris Richard, a principal in the supply chain and network operations practice at the consulting firm Deloitte.While smaller electronics producers may be able to find enough semiconductors, he said, cars contain hundreds or even thousands of chips — often different kinds — and many auto companies do not have direct and close relationships with their providers.The earthquake in Japan temporarily shut down chip plants that supply the auto industry, costing a few weeks of production at one. Making chips requires neon, and much of it comes from Ukraine. Lockdowns in Shanghai may reduce chip production at some Chinese factories.At the same time, demand is booming. Ford reported record retail vehicle orders in March, including for its F-series trucks, which remained in demand even as gas prices jumped.Car buying could begin to slow as the Fed raises interest rates, making car loans more expensive, but so far there is little sign that is happening. In fact, demand has been so strong that automakers have been cracking down on dealers that charge above list price, threatening to withhold fresh inventory.“I don’t see the prices subsiding. You don’t need them to subside,” said Joseph McCabe at AutoForecast Solutions, an industry analyst, explaining that dealer costs are increasing and companies want to protect their profits. “Prices will go up, and there will be less negotiating space for consumers, because there’s high demand and no availability.”Mr. McCabe does not think that car inventory will ever fully rebound: Dealers and automakers have learned that they make more money by effectively making cars to order and running with learner inventory. If that’s the case, the permanently restrained supply could have implications for the rental and used car markets.If car prices keep climbing briskly, it will be hard for inflation overall to moderate as much as economists expect — to around 4 to 4.5 percent as measured by the Consumer Price Index by the end of the year, according to a Bloomberg survey, down from 7.9 percent in February.That’s because prices for services, which make up 60 percent of the index, are also climbing robustly. They increased 4.8 percent in the 12 months through February, and could remain high or even continue to rise as labor shortages bite.Of the goods that make up the other 40 percent of the index, food and energy account for about half. Both have recently become markedly more expensive and, unless trends change, seem likely to contribute to high inflation this year. That puts the onus for cooling inflation on the products that make up the remainder of the index, like cars, clothing, appliances and furniture.While the Fed’s policy changes could tamp down demand and eventually slow prices, policymakers and economists had been hoping they would get some natural help as supply chains for cars and other goods worked themselves out.“We still expect some deflation in goods,” Laura Rosner-Warburton, an economist at MacroPolicy Perspectives, said of her forecast. She said that she expected fuel prices to moderate, and that her call included some “modest declines” in vehicle prices.It’s not just economists who are hoping that forecasts for a rebounding supply and more moderate car prices come true. Buyers and dealers are desperate for more vehicles. Ms. Diehl in Pittsburgh sells makes including Toyota, Volkswagen, Hyundai and Chevrolet, and companies have told her that inventory may begin to recover toward the end of the year — a reprieve that seems far away.Her customers are hungry for trucks, electric vehicles and whatever else she can get her hands on. When one of her dealerships lists a new car on its website in the evening, a buyer will show up first thing in the morning, she said. Her dealerships have a backlog of 400 to 500 parts to fix cars, up from 10 to 20 before the pandemic.“It’s absolute insanity at its finest,” Ms. Diehl said. “I don’t see an abundance of inventory before 2023 and 2024.” More

To learn more about the CNBC CFO Council, visit cnbccouncils.com/cfo-council/

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American consumers are already cutting back on spending, according to a new CNBC survey.
For many living paycheck to paycheck, this is not a surprise as inflation rises and Covid stimulus savings decline.
However, the survey also shows that higher-income consumers are showing signs of financial stress and have begun cutting back on dining out, travel and vacations, and cars.

Miami, Florida, Brickell City Centre shopping mall with Apple Store, Chanel and escalators.
Jeff Greenberg | Universal Images Group | Getty Images

With as much as 60% of U.S. consumers living paycheck to paycheck, it’s not a surprise to see that the spending cutbacks have started. Even with a strong job market and wage gains, as well as Covid stimulus savings, pricing spikes in core spending categories including food, gas and shelter are leading more Americans to mind their pocketbooks closely.
A new survey from CNBC and Momentive finds rising concerns about inflation and the risk of recession, and Americans saying not only have started buying less but will be buying less across more categories if inflation persists. But these financial stress points are not limited to lower-income consumers. The survey finds American with incomes of at least $100,000 saying they’ve cut back on spending, or may soon do so, in numbers that are not far off the decisions being made by lower-income groups.

The high-income consumer demographic is key to the economy. While it represents only one-third of consumers, it is responsible for up to three-quarters of the spending. As Mark Zandi, chief economist at Moody’s notes, “If the high-income consumers are out buying, we won’t see a big impact on raw consumer activity.”

Arrows pointing outwards

Lower-income households are the most at risk, and they are the ones most likely to be making unwelcome tradeoffs to make their money stretch as far as it did just a few months ago, according to the survey results. They are also clearly experiencing more financial anxiety, according to the survey, with 57% of Americans with income under $50,000 saying they are under more stress than a year ago, versus 45% of those with incomes of $100,000 or more. The 68% of high-income consumers who said they are worried higher prices will force them to rethink financial decisions is significantly lower than the 82% of Americans with income of $50,000 or less who told the survey this, but it is still a majority.

More than half of people with household incomes under $50,000 say they have already cut back on multiple expenses due to prices, and for those with income of at least $100,000, the cutback levels are already similar when it comes to dining out, taking vacations, and buying a car.
“People making six-figure incomes are almost as worried about inflation as people making half as much —and they are just as likely to be taking steps to mitigate its effect on their lives,” said Laura Wronski, senior manager of research science at Momentive. “Inflation is a problem that compounds over time, and even high-income individuals won’t be insulated from the second- and third-order effects of price increases,” she said.

Arrows pointing outwards

Other recent consumer survey data paints a weakening picture.

The University of Michigan Survey of Consumers finds more consumers mentioning reduced living standards due to rising inflation than at any other time in the survey’s history except during the two worst recessions in the past 50 years: from March 1979 to April 1981 and from May to October 2008. Notably, the consumer confidence gap between low and high income levels always shrinks at cyclical troughs and is always widest at peak, and the gap is narrowing now, according to survey director Richard Curtin. 
In January, the percentage point gap between the lowest income and highest income group in the survey’s sentiment index was 13.2 points. That was erased in March, with the top income group sentiment actually dipping below the lowest income bracket in overall sentiment and future expectations. In January, the higher income group expectations, specifically, were 18 percentage points higher.
Right now, there is a unique set of issues that could be exacerbating this gap narrowing, Curtin said, including the potential for Russia’s invasion of Ukraine to do more damage to the global economy than forecast and the fact that the majority of the population has not experienced 10%+ inflation, or 15% mortgage rates, as past generations had.
“Even at lower rates they may display behaviors associated with more extreme economic conditions in the past,” Curtin said. “Precautionary motives play a big part in consumption trends for upper income groups,” he added.

Arrows pointing outwards

“The American consumer is in a dark mood,” Zandi said of the CNBC survey data. More than two years since the pandemic hit, first with millions of lost jobs and high unemployment, and now high inflation, and “fractured politics also weighing heavily on the collective psyche.”
All income groups in the survey are equally likely to say the economy will enter a recession this year, at over 80%. But there is a key caveat: actual spending actions from the economy don’t yet indicate this prediction will come true.
Despite the downbeat feelings about their financial situations, and cutbacks, Zandi stressed that consumers are still spending strongly. There are now lots of jobs, unemployment is low, debt loads are light, asset prices are high, and there is a lot of excess saving. Even if people are cutting back, spending less on some items, the mood has not yet taken control of the spending motivation to a degree that amounts to more than a slowdown in economic growth. “I suspect the American consumer will continue spending, regardless of their mood, as long as the job market remains strong,” Zandi said.

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The Conference Board’s latest monthly confidence index reading showed present confidence up (slightly) for the first time this year, but the expectations index lower, with consumers citing rising prices, including gas.
Lynn Franco, director of economic indicators and surveys at The Conference Board, said there is still a gap in its confidence data between lower income and higher income consumers and a lot of that is driven by the inflationary environment, and less impact the affluent will feel from factors including gas prices. She said the gap does always narrow in a pre-recession period — but its data is not indicating a recession as of now.
What its confidence survey is forecasting is a slowdown in growth over the next few quarters driven by higher prices, and more Americans spending less on discretionary items as more of their money goes to covering the basics. That will be most acutely felt by the lower-income consumers, but there is broad-based concern about prices rising significantly in the months ahead — 6 out of every 10 consumers surveyed by The Conference Board think the Russia-Ukraine war will cause prices to rise significantly.
“That is very broad-based and that, coupled with interest rates going up, may make people more hesitant to postpone big-ticket purchases likes housing and autos and washing machines,” Franco said. “We will see a bit of slowing in consumer spending over the next few quarters, but we don’t feel that will drive us into recession.”
The overall confidence level from Americans with income of $125,000 in its survey has come back down from mid-2021, but Franco described them as still “relatively confident despite all volatility we have seen. … The indications we are getting across income groups speaks more towards softening in consumer spending rather than a severe pullback,” she said.
The Conference Board data, similar to other outlooks, is underpinned by a key role for the labor market in supporting confidence and balancing the negative influence of inflation, with Americans who say jobs are “plentiful” at an all-time high. 

More from the CNBC | Momentive consumer survey

Members of the CNBC CFO Council have mentioned “a tale of two cities” among consumers, with higher income bracket consumers continuing to be strong while lower income consumers are beginning to chew through the stimulus. There will be a new equilibrium point, and inflation won’t grow as it has over the past year, but it will remain at a higher level, and the consumer spending has to be set against this dynamic that will play out through calendar year 2022, and is expected to be more sharply felt in the second half of the year.
Key factors that CFOs are watching include the decline in the consumer savings rate; how successful the Fed is in using its tools to slow the economy without pushing it into recession, including raising rates to cool consumption and investment; and greater supply chain stability.
The supply chain remains in flux with new Covid variants, as well as the Russian war against Ukraine hitting energy and food prices. But if supply chain pressures overall do ease, inventory will be replenished at a rate that could lead to more pushback from retailers on pricing, as consumers also begin to slow down consumption habits, trading down in certain categories of purchases or trading away from them.
The Conference Board’s most recent CEO survey showed that companies are passing along the costs of inflation relatively quickly to consumers, and that pattern is likely to continue in the months ahead, with wage gains a contributing factor. “What we are seeing and hearing from members is that these tight labor market conditions are going to continue for several months, so we will continue to see wage pressure,” Franco said.
As earnings come in, the market will be looking for signs of durable consumer strength amid higher prices. Earlier this week, Conagra’s results showed that it couldn’t make price increases flow through to its bottom line relative to input costs, but CEO Sean Connolly said on Thursday that “consumer demand has remained strong in the face of our pricing actions to date.”
Conagra is planning more price increases. More