The squeeze on American wallets continues, and at a faster pace than expected.
We are paying more to fill up our cars, refrigerators and closets – but income isn’t growing and U.S.
unemployment isn’t shrinking.
The Consumer Price Index (CPI) rose 0.5% in July. That’s the measure of average change in consumer prices for goods and services. A survey from Briefings.com found that economists expected the CPI to grow by o.2% in July.
Taking a look at the big picture – we can see that food prices are up 4.2% from last year, and gas prices are up 33.6% from last year.
Partly to blame for rising prices is the weakening dollar.
Clothing costs are up nearly 4% over the last three months. One reason for that is higher cotton prices, but an economist with BMO Capital Economics told CNNMoney that the cost of importing goods also plays a role.
“We import a lot of clothing from China for example, and a weak dollar means it costs more to ship to bring these goods over to the U.S.”
When you remove the so-called volatile increases from gas and food prices – what’s known as the core CPI only rose 0.2%. That’s along the lines of what economist predicted.
But while food and gas prices may be fickle – they are also necessities to every American home.
The excuse that a cold winter and early spring delayed harvest on things like beans, carrots and tomatoes doesn’t matter to average Americans. All that matters is it costs 6.9% more to purchase fresh produce and feed their families healthy food.
As prices keep rising, consumer spending and consumer confidence are shaky at best. While retail sales rose in July, the first two quarters of 2011 showed only anemic growth.
Americans instead are trying to save more and pay down debt. That’s a good idea – but since the U.S. economy depends so much on consumer spending – it’s not helping our economic situation.
So What Needs to Be Done to Fix the Problem?
Presidential candidate Michele Bachman has made a campaign promise of bringing back $2 a gallon gasoline.
That sounds great! But making it happen would be pretty tough. What we pay at gas stations is largely out of our control since crude oil prices are tied to the global economic system. And the problem is there is so much growing demand for crude oil around the world.
Experts say if gas prices did drop dramatically it would probably be an indication that things aren’t going so well economically. Because when there’s a recession – there’s less demand – and prices go down. That’s why gas prices were so much lower in the beginning of 2009.
People stopped spending – and a decrease in demand on goods meant trucks weren’t going out on the road to make deliveries as often, which meant less demand for gas, which meant lower prices.
“You have to be careful what you wish for because the recipe for cheap prices these days is economic disaster,” says Tom Kloza, chief oil analyst at the Oil Price Information Service.
The answer to dealing with rising inflation is the same answer to practically all our economic woes…JOBS.
More jobs, secure jobs, and better paying jobs.
But our lawmakers in Washington haven’t been able to come up with a good way to create jobs. That’s because they’re too busy fighting over things like the budget deficit and making sure the other side fails in the 2012 elections.
President Barack Obama says he’ll announce a jobs plan for the U.S. in September. But he’s not saying much now about what will be part of that plan.
It seems his main idea is extending the 2011 payroll tax cuts. That move puts more money in the pockets of working Americans, but what does it do to create new jobs? It doesn’t actively encourage hiring.
Any jobs plan President Obama does come up with is going to be met with a lot of opposition from Republicans. Even if there are bold ideas in his proposal – many say it will be unlikely that anything will happen before the next election.
It makes one think that the only real reason the White House is putting together a plan now is to say during campaigning -Â “Hey we tried something but those dang Republicans foiled our genius plan.”
Let’s be optimistic…
Imagine if a jobs plan could get approved. What would you tell the president to put in it? Leave us your comments and let us know!
Get a little more insight into what the president is thinking by watching the interview below.
+Kasey Steinbrinck writes regularly on personal finances and the U.S. economy for Check Advantage. Visit them today and view their most popular checks including a big collection of Classic Checks. Contact Kasey to request free content for your website or blog.
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