Alternate headline: Americans still don’t buy Joe Biden’s incoherent happy talk. Alternate sub-hed: Get ready for a bad Q3 on consumer spending. Not only does the latest Washington Post poll show American consumers unhappy with inflation, the level of pessimism mirrors that of the recent Wall Street Journal poll that the White House rejected yesterday:
Most Americans expect inflation to get worse in the next year and are adjusting their spending habits in response to rising prices, according to a poll conducted by The Washington Post and George Mason University’s Schar School of Policy and Government.
Inflation, which is near 40-year highs, has lifted the cost of just about everything, including essentials such as gas, groceries and housing. Overall prices are up 8.3 percent in the past year.
Families are feeling the pinch. Nearly 9 in 10 Americans say they’ve started bargain-hunting for cheaper products, and about three-quarters are cutting back on restaurants and entertainment, or putting off planned purchases, according to the Post-Schar poll conducted in late April and early May.
Bear in mind that this is roughly the same time frame as the earlier WSJ poll. The WaPo/Schar survey starts off with questions about summer vacation plans, which show that six in ten Americans will not spend more time on vacation despite it being the first fully free vacation period in three years, thanks to the pandemic. Separately, 47% say they will use the same number of days as a normal vacation, while 27% say they plan to spend fewer days vacationing. When it comes to making plans, however, the coronavirus pales in comparison to prices when making summer vacation plans:
The later questions touch on the economic projections made around the kitchen tables of Americans. While optimism about personal finances remains about the same as it has in this series (69/26), Americans are planning for rougher times ahead. Two-thirds expect inflation to get worse in the next year, with 30% expecting it to get “much worse” — higher than the two “better” categories combined (21%). The current levels of inflation have already cut into consumer spending as of the mid-May end of this survey, and likely more so after that. Here are the levels of reduction in major spending areas
- Electricity: 59%
- Entertainment/eating out: 77%
- Delaying significant purchases: 74%
- Reduced savings deposits: 59%
- Looking for cheaper brands/generics/alternatives: 87%
These numbers are almost all worse than the survey taken in July 2008, as the country entered the Great Recession. Only 61% of respondents were delaying purchases in the summer of 2008, and only 50% were reducing their savings deposits. Even when it comes to finding cheaper alternatives, that impulse was slightly less (81%) 14 years ago, when the economy was clearly shrinking and financial institutions were crumbling.
The Washington Post warns that these trends could become not just a self-fulfilling prophecy but also a vicious cycle:
The poll’s results could also be an early warning sign of the path of inflation in the months to come. As more Americans change their behavior assuming inflation will get worse, those actions can drive inflation up, leading to a cycle that’s difficult to break. Indeed, some 52 percent of Americans in the poll said they bought products before the prices went up.
“People’s expectations of inflation are rising,” said John Taylor, an economist at Stanford University and a former Treasury Department official in the George W. Bush administration. “The concern I have is that if people are saying, ‘Inflation is picking up, let’s buy now,’ that increases inflation even more.”
If anything, the supply chain issues likely drive that behavior more. Having both inflation and shortages in combination is particularly toxic for a national economy. It sets the incentives for hoarding even more strongly than either would on their own, although the shortages themselves are likely driving most of this behavior.
This is yet another indicator of the failure of Biden and his team on economic policy as well as spin. They’ve trotted out every excuse under the sun for inflation and its erosion on Americans’ personal economies except the one truthful explanation, which is that Biden screwed up on stimulus and spending and was derelict on supply-chain issues. Biden may be complaining that his messaging isn’t breaking through, but his failures certainly are. In fact, they’re unmistakable — and Americans expect them to get worse.