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Expand chart
Data: CivicScience; Chart: Will Chase/Axios

Americans are growing more concerned about rising costs and are consistently boosting their inflation expectations, new data show.

Driving the news: A new survey from CivicScience shows 87% of those surveyed in a representative sample of U.S. adults say they are at least "somewhat concerned" about the increasing cost of household expenses (all numbers are rounded to the nearest percentage point).

  • That's up 10 percentage points from its survey in March.
  • The problem is growing especially acute for lower-income households who say they are cutting back on purchases because of rising costs.

Why it matters: "It’s very real for people to worry about inflation right now," Clark Kendall, president and CEO of Kendall Capital, tells Axios.

  • "Sitting across from clients they are very concerned ... they are worried about inflation and they’re worried about if you’re looking to retire at 60-65, 'Will I have enough money to buy toilet paper, toothpaste 20 years from now?'"

What's happening: As I wrote on Wednesday, the Fed and most mainstream economists are largely in agreement that the current uptick in prices will be temporary, but the data show customers already are reacting.

  • Major brands have rolled out price hikes consistently over the course of the year, along with notable increases in the price of cars, construction, furniture and gas that are starting to show signs of staying power.
  • The CivicScience survey found that, among households earning $50,000 a year or under, 33% say they are buying less because of rising prices.
  • More than a quarter of all households (27%) say rising prices have caused them to buy less than they did previously.

Between the lines: Rising prices are exactly what the Fed wants, explains Lou Brien, rates strategist at DRW Trading.

  • "The preeminent monetary policy challenge of this era is moving inflation expectations, inflation, the policy rate and even the 10-year [Treasury yield] away from zero, because that’s inhibited their policy rate over last 10 years," he tells Axios.
  • "They haven’t been able to cut rates aggressively when they’ve needed to because [the policy rate] was already too close to zero."

Where it stands: As part of its new policy regime, the Fed has taken a new approach, Brien says.

  • "The Fed is saying, 'When inflation gets to our target we’re going to go out for beers. We’re going to allow it to run above our target for a certain time.'"
  • But the "grab a beer" policy isn't going exactly as planned.
Charted: Consumers are cutting back
Expand chart
Data: CivicScience; Chart: Will Chase/Axios

The problem is that wages are not rising along with prices and most Americans don't expect that they will in the future.

What we're seeing: The New York Fed's survey of consumers finds that while inflation expectations are the highest in 7 years, at 3.2% for one- and 3.1% for three-year-ahead timeframes, expectations for household income growth remain at 2.7%, below where they were in January 2020.

The big picture: While this has not become a major concern for the economy yet, it very well could once enhanced unemployment, mortgage forbearance and eviction moratoriums expire and stimulus checks have been spent.

  • "Government payments added $1.5 trillion to personal income last year, which accounted for 8.5% of after-tax personal income," Brien wrote in a recent note to clients.
  • "For comparison’s sake, the jobless benefits addition to personal income in 2019 accounted for just 0.1% of disposable income."

The bottom line: If and when government assistance dries up, a growing share of Americans may find that the booming economy and its steadily increasing prices have further left them behind.

Go deeper

Dion Rabouin, author of Markets
Apr 21, 2021 - Economy & Business

Inflation looks to be not so transitory as price hikes continue

Illustration: Annelise Capossela/Axios

Procter & Gamble became the latest company to announce it will raise its prices in September to respond to higher commodity costs, joining consumer giants like Kimberly-Clark, Smuckers, Coca-Cola and a host of others.

Why it matters: Fed chair Jerome Powell and other top economists have all but decreed that inflation is anchored and will not rise materially going forward, but a consistent drumbeat of price hikes from major companies, consumer reports and market data suggest the world may not be going along with their conclusion.

Felix Salmon, author of Capital
Apr 22, 2021 - Economy & Business

The fall and fall of bank lending

Expand chart
Data: Federal Reserve via FRED; Chart: Axios Visuals

Banks are taking in record deposits — they now have a record $16.8 billion, as of the most recent Fed report — but they're not doing a good job of turning around and lending them out.

By the numbers: Total bank loans and leases are now just 61.5% of the American deposit base. For the biggest banks, as Bloomberg's Shahien Nasiripour reports, that number falls to 53.7%, a new all-time low.

Jake Ellzey defeats congressman's widow in Texas Senate seat race

Photo: Justin Hamel/AFP via Getty Images

Jake Ellzey won a special a runoff election for the U.S. House Seat in Texas on Tuesday night.

Why it matters: It's a blow for his opponent Susan Wright, widow of the late Rep. Ron Wright, who was endorsed by former President Trump.

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