The price of some goods and services is still undercutting Americans

Gas prices are falling and employers are hiring, but some goods and services remain stubbornly expensive, resulting in mixed consumer sentiment.



AYESHA RASCOE, PRACTICE:

Now to the economy, the nation’s and yours. Businesses are hiring. Unemployment is low. But many Americans say they are upset about their finances, and that could be a big factor in this year’s election. NPR’s chief economics correspondent, Scott Horsley, joins us now. Good morning.

SCOTT HORSLEY, BYLINE: Great to be with you, Aisha.

RASCOE: So, Scott, we know that inflation has a lot to do with people’s dissatisfaction with the economy. When I go out to eat or go to the grocery store, the prices are still high. A Red Baron pizza used to cost $5. Now it’s $7. So what’s going on?

HORSLEY: Well, you’re right. Inflation has fallen sharply since reaching a four-decade high a few years ago. At that time it was over 9%. It is now below 3.5%. We’ll find out about May’s cost of living this coming week. But there has not been much progress in inflation in recent months.

Now, there’s some encouraging news at the gas pump. Gas prices fell 8 cents per gallon last week. This is the biggest drop every year. And we know that gas prices have a huge impact on how people feel about the economy, so we’ll see if cheaper gas helps people get out of the funk they’ve been in.

RASCOE: Yeah, I mean, it’s definitely nice to see gas prices come down, especially when people are traveling for the summer. But many other things still seem really expensive.

HORSLEY: You’re right. Food prices are down quite a bit, but they’re not falling, for the most part. And the price of restaurant meals continues to rise by about 4% per year. Now, businesses say they are getting more pushback from customers who have reached their spending limit. More shoppers are looking for bargains, and some businesses are responding with more discounts. Applebee’s, for example, reintroduced its $1 margarita, and more than a quarter of all Applebee’s customers are now taking advantage of some kind of promotion when they order.

So people are becoming more price conscious. Companies should think twice about raising prices because they know they risk losing business when they do. And by the way, this is normal. That’s how the economy usually works. What was abnormal was the situation we’ve had in recent years where companies raise prices at will and buyers just keep buying.

RASCOE: A dollar margarita sounds like a party to me (laughs). But one thing that doesn’t discount is house prices. They’re still growing, and we might need some margaritas if we end up going house hunting.

HORSLEY: Yes, and that’s a big concern, especially for people trying to buy their first home. There aren’t many houses on the market, so prices are high, and then there’s the double whammy of high interest rates. A new poll from Fannie Mae this past week showed that only 14% of people think this is a good time to buy a home. Mortgage rates eased slightly over the past week, but they are still very close to 7%.

RASCOE: So what will it take to get lower interest rates? I thought I heard they were going to start lowering them a bit.

HORSLEY: The Federal Reserve has signaled it wants to see more progress in inflation before it starts cutting interest rates. Several other central banks in Europe and Canada began cutting rates last week, but the Fed is expected to hold steady when policymakers meet on Wednesday. Borrowing costs are likely to remain high through the summer at least, and that means it will remain expensive to get a car loan or borrow money for a business or simply carry a balance on your credit card. We may start to see some relief from those high interest rates in September, but that will depend on what happens with inflation and the labor market between now and then.

RASCOE: But the job market still looks pretty good, right?

HORSLEY: Yes. The Labor Department reported Friday that employers added 272,000 jobs in May, far more than forecasters expected. Average wages also rose 4.1% over the past year, more than enough to keep pace with inflation. However, this strong job market is a double-edged sword. It’s good for workers, but these big wage gains can put upward pressure on prices, and that makes it much harder for the Fed to get prices under control, so it feels confident about cutting interest rates.

RASCOE: NPR’s Scott Horsley, thank you very much.

HORSLEY: You’re welcome.

Copyright © 2024 NPR. All rights reserved. Visit our Terms of Use and Permissions pages at www.npr.org for more information.

NPR transcripts are created on a rush timeline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative recording of NPR programming is the audio recording.

#price #goods #services #undercutting #Americans
Image Source : www.npr.org

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top