An economist warned that the United States is at the brink of a cost-of-living crisis as inflation continues to rise around the world.
CNBC’s Mohamed El-Erian stated on 11 May that it was only a matter time before we start talking about a living crisis.
How inflation is causing a cost-of-living crisis
The rate of inflation fell in April, but the Consumer Price Index for All Urban Consumers increased by 0.3%. This is after rising by 1.2% in March. According to the US Bureau of Labor Statistics, annual inflation remains at its highest level for 40 years.
The all-items index, which measures the prices of various goods and services, has increased by 8.3% over the past twelve months. This is before seasonal adjustment. The food index also increased by 9.4%. This is the largest 12-month increase in 12 months since April 1981.
The US Federal Reserve, the country’s central banking institution, made its largest interest rate increase in 22-years on May 4th.
Jerome Powell, Chairman of the Federal Reserve, stated that inflation is too high and that he understands the hardship it causes. “We are working quickly to bring it down.”
The chart above shows how 11 household items have seen their prices rise over the past 20 year.
According to the Bureau of Labor Statistics, April’s food index rose by 0.9%. This is the 17th consecutive month of growth.
Five of six major grocery store food indexes increased over the month. The largest monthly increase since July 2007 was at 2.5% for dairy and related products. The price of eggs increased by 10%.
Only one food group saw a drop in prices in April: fruit. It fell 0.5%.
What is the Consumer Price Index?
The Consumer Price Index measures changes in prices consumers pay for goods or services. It shows spending patterns for both urban consumers (which make up 93% of the population) and urban wage earners and clerical employees.
Two indexes measure inflation for urban consumers: the Consumer Price Index for All Urban Consumers, (CPI–U), and the Chained Consumer Price Index for All Urban Consumers, (C-CPI–U).
CPIs are calculated based on the prices of food, clothing and shelter as well as for fuel, transport, doctor and dentist services, medicines, and other goods and service that people use for their daily living. The prices are collected in 75 cities across the country each month.
What the US and global citizens think about the cost to live
As a quarter of the world’s population say they are in financial difficulties, April’s inflation figures and May’s interest rate increase come as a surprise.
According to Ipsos, 16% Americans say the situation is very difficult or very difficult in the US. This compares to 66% of Turkish citizens.
The Americans are most optimistic about their disposable income in the next year. 26% expect it will rise while a third expect it fall. But, around two-thirds (63%) of British citizens and half (60%) of Turkish citizens expect their disposable income will decline.
It remains to see if measures to lower inflation can reduce the global cost-of-living crisis.
