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SALT LAKE CITY — Persistent, record-high inflation hasn't been an issue for U.S. consumers for decades, but that took a dramatic turn in the last year-and-a-half and has yet to show any clear signs of easing, in spite of aggressive monetary policy moves aiming to tamp down surging costs.
And the economic strife is hitting individuals and families where it hurts most as the rising costs of basic necessities have been a main driver of inflation rates that have been running at or near 40-year highs for much of the year.
Results from a new Deseret News/Hinckley Institute of Politics poll captured inflation's impact on Utahns and their growing fatigue and worries about escalating costs of goods and services.
In a statewide survey conducted Sept. 3-21 of 815 registered Utah voters by Dan Jones & Associates, 96% of respondents said they were very or somewhat concerned about inflation and 4% were not very or not at all concerned. The poll has a margin of error of plus or minus 3.43 percentage points.
The number of Utahns citing inflation as a top worry has been on the rise since a July 2021 Deseret News poll that found 85% of Utahns were very or somewhat concerned about inflation and another check-in in February 2022 when 93% of survey participants registered concerns about the rising costs of goods and services.
The level of concern shifted slightly according to political persuasion. Republicans and conservatives in the poll were more concerned than Democrats and liberals, though all were above 84%. Also, Utahns expressed a high percentage of worry about inflation regardless of income.
Nate Lloyd, deputy research director for the University of Utah's Kem C. Gardner Policy Institute, wasn't surprised at the level of worry among Utahns when it comes to inflation and said those concerns are shared by federal policymakers who have been working to tamp down the U.S. economy through a series of interest rate hikes this year.
"The Federal Reserve's five rate hikes so far this year are all meant to combat inflation," Lloyd said. "It's a concern that is top of mind for the economists at the Fed and those trying to rein in inflation.
"It really is the biggest risk to the economy right now."
Wednesday marked the Fed's third consecutive 0.75% increase to the rate it charges for lending between financial institutions and, along with the other raises this year, constitute the fastest rate escalation in decades.
Lloyd said high inflation is being driven by a basic imbalance in supply and demand, with various issues that have increased the costs of producing and delivering goods alongside a U.S. consumer demographic that has seen steadily rising wages and is still spending cash received via federal COVID-19 stimulus funding.
"People have money to spend," Lloyd said. "The vast majority of people have jobs and we're still seeing really low unemployment. While there's some variation across income levels, U.S. households are pretty healthy from a financial perspective."
So far, that consumer financial health and high rates of spending have held up even as the Federal Reserve hikes rates to increase the cost of debt in an attempt to cool consumer spending. Theoretically, that should bring down inflation by addressing demand.
Last week, mortgage rates crossed the 6% threshold and hit their highest point since 2008, upping the pressure on the U.S. housing market and pricing out even more would-be homebuyers.
Freddie Mac predicts the high rates will continue to temper demand across the U.S. Although home for-sale inventory is rising, it still remains at "inadequate" levels, meaning home price declines will likely continue — but not fall off a cliff.
And the average interest rate on credit cards hit 17.96% this month, the highest rate since 1996, according to Bankrate.com.
Bankrate senior industry analyst Ted Rossman told MarketWatch that for those carrying credit card debt, that means your rate could fluctuate as a result.
"Rate hikes generally affect new and existing balances," Rossman said, adding that "most credit cardholders are currently facing rates that are 225 basis points higher than they were just six months ago."
A concern shared by Lloyd and many U.S. economists is that the Fed's aggressive interest rate strategy could push the economy into recessionary conditions.
The latest Deseret News/Hinckley Institute poll found that this is also a concern for an overwhelming percentage of Utahns, with 88% saying they were very or somewhat concerned about a recession hitting in the next year while 12% are not concerned and 1% weren't sure or didn't know.
Turns out, Utahns have been somewhat more prescient than even the Federal Reserve when it comes to anticipating the tides of the U.S. economy.
Back in July 2021, Federal Reserve Chairman Jerome Powell and other Fed board members were characterizing the rising inflation of the time as "transitory," a description they would later all retreat from when inflation continued to persist.
The Federal Reserve's five rate hikes so far this year are all meant to combat inflation. ... It's a concern that is top of mind for the economists at the Fed and those trying to rein in inflation.
–Nate Lloyd, Kem C. Gardner Policy Institute deputy research director
But in the survey conducted that month, among the 85% of Utahns who said they were concerned about inflation, 25% said higher prices would be "temporary" versus 60% who believed inflation would be a "lasting" concern.
A number of economists predict the Fed's steep rate hikes will lead to job cuts, rising unemployment and a full-blown recession late this year or early next year.
While the cost of borrowing money is on the rise — just the kind of results the Fed is hoping to see — other consumer trends are offsetting the dampening effect of rate increases.
Those factors include a U.S. job market that continues to run red hot and still robust consumer spending.
Employers added 315,000 jobs in August, according to the latest U.S. Labor Department report. The national unemployment rate ticked up to 3.7% from a 50-year-low 3.5% in July. Hiring was down from July's mammoth 526,000 new hires but the August volume is still well above pre-pandemic rates, and job listings still far outnumber the available workers to fill them.
Labor Department data shows eight of 13 retail spending categories rose in August, per CNN. Spending at food and beverage retailers was up 0.5% for the month and has risen by 7.2% over the past year. Sales increased at restaurants and bars, as well as car dealerships jumped by 2.8% on the month. Spending on building materials and equipment, clothing and sporting goods also rose.
