Consider This from NPR - Why Americans Feel The Toll Of High Inflation Beyond Gas Pumps & Grocery Stores

Episode Date: May 26, 2022

This is a fragile moment for the U.S. economy. Many people are feeling the steep rise of the cost of gas and groceries, and some are having to decide whether to buy food or fill up their tanks. Food banks and local non-profits are seeing more people than ever. And experts worry that the Federal Reserve's efforts to combat inflation by raising interest rates could tip the economy into recession.NPR's Scott Horsley covers the big-picture economy, Chris Arnold covers housing and Brittany Cronin covers energy. They explain what sectors are feeling the most impact and how it's playing out for different people.In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This message comes from Indiana University. Indiana University is committed to moving the world forward, working to tackle some of society's biggest challenges. Nine campuses, one purpose. Creating tomorrow, today. More at iu.edu. This is a fragile moment for the U.S. economy. Stretched in by the rising costs of, well, everything. Now, maybe you haven't been tracking every headline on inflation, but chances are you felt it in your everyday life. The price of milk, eggs, meat, fish, and fruit are all up at least 10 percent. Food banks nationwide. We used

to just feed homeless people. That's Shannon Carr. She runs a non-profit that helps needy families in Cincinnati. We're taking meals to families now with children, the working poor, because people are having to choose between healthy food and, you know, things that they can afford. The cost of gas is way up, too. Kim Boeder was filling up her tank in Harlem when NPR caught up with her. It's disgusting. Like people have to really decide on whether to buy food or to buy gas, to get to work, to get to the food. It's really ridiculous. Another worry? Federal Reserve raising interest rates to... That the Federal Reserve's efforts to combat inflation could tip the economy into recession.

Utah realtor Kenny Parcell says rising interest rates are already taking a toll on the housing market. This is real life stuff. This is young families, people that were barely getting in before and the dream of home ownership and they're watching it go away. Consider this. Americans are feeling the squeeze as inflation has led to higher prices on so many things, from food to transportation to housing. But is it all doom and gloom? We'll check in. From NPR, I'm Mary Louise Kelly. It is Thursday, May 26th. This message comes from WISE, the app for doing things in other currencies. Send, spend spend or receive money

internationally and always get the real-time mid-market exchange rate with no hidden fees download the wise app today or visit wise.com t's and c's apply it's consider this from npr so what is the current state of the economy well i, I talked with three of my NPR colleagues for their takes on this in the sectors feeling most of the impact and to hear how it's playing out for different people. Brittany Cronin covers energy, Chris Arnold reports on housing, and Scott Horsley covers the economy big picture. All right, Scott, you start. We'll go big picture first. We've mentioned inflation. We've mentioned how high prices are. Is that affecting what people buy? So far, inflation has not put much of a dent in consumer spending, and that's important because

that is the big driver of the U.S. economy. Obviously, the people who feel it most are those who are just getting by. McDonald's says some of its most price-sensitive customers have started to downsize their orders. Walmart says some grocery shoppers are switching to cheaper store brands. Shannon Carr, who talked to our colleagues at Weekend Edition Sunday about shopping at Dollar Tree stores in Cincinnati, says she's seeing long lines there, even though Dollar Tree famously raised its prices to a dollar and a quarter late last year. The prices at the other stores are extremely high. So you have to choose your battles. And Dollar Tree, you know, at least it's under five dollars, right? Low-income families tend to suffer most from inflation for a couple of reasons. First, a lot of what they buy is necessities,

so there's not a lot of opportunity to cut back. And secondly, they often pay higher prices even for the same items. They might not have the money or the gasoline to drive to Costco and get a bulk discount, for example. Yeah, speaking of gasoline, Brittany, I want to bring you in here because anybody who's filled up their car recently knows prices are just skyrocketed. You've also been reporting, though, on the cost of diesel, which is so critical for trucks and truck drivers. What is going on there? Yeah, so diesel prices hit their highest level ever in the past week. So I spoke with Eric Jammer. He owns and operates a massive heavy haul truck out of Houston, Texas. At first, it was sticker shock because, you know, you hit that point where, you know, God, this is what it used to take to fill up and this thing

is still going. Holy crap, it's not stopped yet. It's $800. And you're like, OK, I got to do this again tomorrow. And diesel prices are skyrocketing in part because of Russia's invasion of Ukraine. And also the U.S. is exporting more diesel to Europe to help reduce its reliance on Russian fuel. And so as diesel prices go up, so do prices of the goods these trucks haul, much like at those $1.25 stores that Scott mentioned. The $1.25 stores, yeah, they may need to rebrand.

We were talking about the high prices at grocery stores, even at places like McDonald's. What about the people, Brittany, who grow the food? Talk to me about how farmers are affected by all this. Farmers are up against really high costs. Some of that is diesel for the tractors, tillers, sprayers, harvesters. I spoke with Phil Fore. He's a sixth generation corn and soybean farmer in western

Illinois. And he says the price of diesel, yeah, it's a bitter pill to swallow, but it's not the thing that hurts him the most. Fertilizer price is the thing that is really, I'm going to say it's gone off the tracks. Fore says that's typically the biggest expense on the farm. And he's paying double what he did last year. Now, both Russia and Ukraine are major exporters of fertilizer. Russia is, of course, facing heavy sanctions. That drags down the global supply of fertilizer, pushing up food prices here at home. So interesting. All right, Scott Horsley, what's it going to take to bring down inflation?

How does this end? Well, it's a case of supply and demand. For over a year now, demand has been outstripping supply. That's why prices have been going up. It would have been nice and relatively painless if supply had just caught up and inflation had come down on its own. That's what the Federal Reserve was hoping for for much of last year. But that didn't happen. So now the central bank is deliberately trying to tamp down demand by making it more expensive to borrow money. And that is not painless. It means higher cost for credit card balances and car loans and especially mortgages. Yeah, mortgages are extremely painful right now for people trying to buy a house. That is absolutely true.

Yeah. Chris Arnold, jump in here. Thanks. We should say that during the pandemic, home prices themselves went up 30% just in two years, which is a massive move. And now on top of that, with the Fed raising interest rates, it's magnifying the cost of buying. Mortgage rates move a lot in times like this because the market anticipates what the Fed is going to be doing over the next year and they adjust quickly. So rates have gone from less than 3% this past summer to above 5%. What that means, you do the math on that, and for a $500,000 loan, it's more than $600 a month more in monthly payments to buy that same house now. Which is not nothing. That's not spare change. I mean, the bottom line then is what fewer people can afford to become homeowners now. Right. And the numbers show that

there are fewer people buying new construction homes. And actually, some people who've signed contracts to buy a new construction home, there have been delays. We've all heard about the supply chain problems. And so now it's six months or a year later, and they thought they could buy this house. But now rates are so much higher and they can't qualify to get a mortgage, so they can't buy the house. I talked to Kenny Parcell, a realtor in Spanish Fork, Utah, about this. We've had 10 people we've been working with that are canceling right now. There's a lot of tears shed on you have real empathy for these people. But the problem is, too, Chris, is rent prices are so high

right now as well. You know, they can't afford to stay in their rental. They can't afford to lose their construction deposit or their earnest money. They're in a real pickle. And he says he's got homebuyers with deposits of upwards of $20,000 and they're worried they're going to lose that money because they're going to have to back out of buying these houses. I mean, I suppose the thing here is, Scott Horsley, I'm going to give you the last word, this is the system working, right? This is what the Fed is trying to do, is make it more expensive to borrow money because that's how they're hoping to cool off inflation. That's right. And the challenge is to cool off inflation without putting the economy itself into a deep freeze. The Fed has made it clear

it's willing to tolerate some short-term pain if that's what it takes to get prices under control. One positive note, most Americans came into this year in relatively good financial shape with some extra money in the bank, so they do have some financial cushion to help them weather this rough patch. That is NPR's Scott Horsley, Chris Arnold, and Brittany Cronin. It's Consider This from NPR. I'm Mary Louise Kelly.