Consumer spending in the US has seen a significant surge, driven by increased purchases of motor vehicles and travel. However, this rise in consumer spending has raised concerns about inflation and its potential impact on the economy. In September, measures of US inflation showed a slight decline, with consumer prices rising by 0.4% from August to September. Core prices, which exclude volatile food and energy costs, climbed by 4.1% in September compared to the previous year. The Federal Reserve has been actively raising interest rates to control inflation, but there is ongoing debate among policymakers about the necessity of another rate increase.
In Canada, the picture is slightly different. Manufacturing sales declined in September, indicating softer economic growth. Consumer-related sectors, such as retail sales and hospitality services, have also weakened significantly. The impact of rising inflation is evident in the housing market, with rents in Canada experiencing a sharp increase. The chief economist at BMO, Doug Porter, has identified rising rents as the 'new villain' of Canadian inflation. Rents have increased by 8.2% year-over-year, the fastest pace since 1983, outpacing the growth in personal income. This is the first time in 60 years that income growth has trailed behind rents [a6226de0]. The Bank of Canada has expressed concern about the impact of Canada's housing crisis on inflation. The ongoing structural shortage of housing supply in the economy is sustaining elevated house prices. Until real estate prices come down further, the housing crisis will continue, and the economy will struggle with stagflation. Real estate prices have a significant impact on businesses, as they face pressure to raise costs to cover high rents, and workers seek higher pay to cover increased living costs. Evidence from the US suggests that when real estate prices rise relative to other assets, inflation tends to follow, and growth slows, resulting in stagflation [89c42259].
The impact of rising inflation and housing costs is causing a housing squeeze in Canada, leading the government to consider implementing reforms to open up rules around zoning and construction. However, it is acknowledged that digging out of the housing crisis will be a long and painful process. The inflationary mindset in the housing market is contributing to the persistence of high prices. Additionally, the article mentions the impact of oil prices on inflation and highlights the challenges posed by rental laws and regulations in different provinces.
In Sioux Falls, South Dakota, high housing prices remain a concern despite falling inflation. Dr. Ernie Goss, director of the Institute for Economic Inquiry at Creighton University, states that the monthly housing price for a house in Sioux Falls has almost doubled over the last couple of years. He attributes the price increases to inflation, which has led to part-time employment and dual job holding as people struggle to afford the increased costs of food and other products. The inflation is not confined to one area, as housing, rent prices, food prices, and insurance costs have all increased. Dr. Goss blames the Biden administration's Inflation Reduction Act for pushing inflationary pressures up by increasing demand without increasing supply. Sioux Falls housing prices are particularly problematic, with individuals paying between 40 and 50 percent of their monthly income on housing, when it should ideally be around 28 to 30 percent. While inflation is falling, prices are not coming down as quickly, with the current inflation rate in America at 3.48 percent. Dr. Goss predicts slow progress in reducing prices due to their slower rate of decline [fdb60ead].
In California, inflation has hit families the hardest, worsening their already high costs of housing and living expenses. The state has one of the highest rates of inflation in the US, worsening its already high costs of housing and living expenses. California has the highest level of functional poverty, with 13.2% of Californians living in poverty. A quarter of Californians are either living in poverty or financially close. Prices for necessities have increased unevenly across goods and services, with food prices up 27% and gasoline up 29% compared to April 2019. Lower-income households spend almost all of their resources on food, housing, transportation, and healthcare. Efforts to curb inflation have a compounding effect, affecting home ownership and business prices. Inflation also impacts the public sector, increasing the costs of providing services and contributing to budget deficits. California has some of the highest fast food prices in the US, with a McDonald's Big Mac costing an average of $5.11 compared to $3.91 in Mississippi [74cb35e8].
In Canada, the Bank of Canada is grappling with the challenges of rising rents and housing costs. Both countries are navigating the delicate balance between stimulating economic growth and controlling inflation.
In the US, most Americans have a sour view of the economy due to stubborn inflation in living costs. This sentiment is particularly prevalent in California, which has one of the highest rates of inflation in the country. The state also has the highest level of functional poverty, with 13.2% of the population living in poverty. A quarter of Californians are either living in poverty or financially close. Inflation has a disproportionate impact on lower-income households, who spend a larger portion of their resources on food, housing, transportation, and healthcare. Efforts to curb inflation, such as maintaining high interest rates, have a compounding effect on home ownership, businesses, and public sector budgets. Inflation also affects fast food prices, with California having higher prices compared to other states. Inflation is a major reason why many Californians struggle to move up the economic ladder [a57b6d77].
According to an opinion piece by Dan Walters in the Times of San Diego, inflation is hitting California families hard, shaping their views on the economy. California has one of the highest rates of inflation in the US, exacerbating the already high costs of housing and living expenses. The state has the highest level of functional poverty, with 13.2% of Californians living in poverty or financially close. Lower-income households spend almost all of their resources on food, housing, transportation, and healthcare. The Public Policy Institute of California found that these necessities cost low-income households about $26,000 in 2018-19, and by 2024, they would need to spend over $32,000 on the same goods and services. The top income group spent on average $82,000 on these basics in 2018-19, which would now cost nearly $100,000 in 2024. Inflation also affects the public sector, increasing the costs of providing services and causing budget deficits for the state and local governments. Efforts to curb inflation, such as maintaining high interest rates, have a compounding effect on the economy. Fast food prices in California are higher compared to other states, with a McDonald's Big Mac costing an average of $5.11 in California and $3.91 in Mississippi. Inflation is a major reason why many Californians cannot move up the economic ladder [7808caa1].
Most Americans have a sour view of the U.S. economy due to stubborn inflation in living costs. Former President Donald Trump has an advantage in the 2024 general election due to the economy, while President Biden's reelection prospects are negatively affected. California has one of the highest rates of inflation, worsening its high costs of housing and living expenses. The state also has the highest level of functional poverty. The impact of inflation on California families struggling to pay for housing, food, and other necessities is significant. Lower-income households spend a large portion of their resources on food, housing, transportation, and healthcare. Inflation makes it difficult for those on the lower rungs of the economic ladder to move up. Efforts to curb inflation have a compounding effect, affecting home ownership, businesses, and public sector budgets. The Public Policy Institute of California found that the cost of necessities for low-income households has increased significantly. Inflation also affects fast food prices, with California having higher prices compared to other states. Overall, inflation is shaping families' views on the economy and has wide-ranging impacts. [70eee680]