Staff Reports
The economy is a big topic this election year. In times past, people worry about jobs and recessions during elections. But this year, inflation is the top worry.
Inflation expectations for the next year are higher, as are long-term inflation expectations, and this is not good news for President Biden. The latest consumer price index data shows inflation dropped a little to 3.4% for the year ending in April. This is down from previous numbers, but it’s still well above the healthy 2% level set by the Federal Reserve.
CAVUTO: Why does Biden keep claiming inflation was 9% when he took office — when it was actually 1.4%?
BERNSTEIN: "The president talked about how concerned he was for households struggling with prices."
CAVUTO: "That's not what I asked you. Why does he keep misrepresenting… pic.twitter.com/lMaKNfeSOV
— RNC Research (@RNCResearch) May 16, 2024
Inflation has been rising for months. Late last year, inflation was going down fast. People thought prices would stop going up, and the Fed would lower interest rates. But these hopes have faded as inflation readings continue to disappoint.
The producer price index, which looks at wholesale inflation, went up slightly for the third month in a row right before the consumer price index data came out.
Republicans blame President Biden for the high inflation and higher interest rates. They say that President Biden’s federal spending caused demand and prices to go up, and they plan to use this argument during the campaign.
Consumer sentiment and inflation expectations have a big impact on how people feel about the economy, and this is important for President Biden. The University of Michigan Consumer Sentiment Index dropped to 67.4 in May, down from almost 77.4 in April. This shows that people are feeling less positive about the economy.
A Bloomberg News -Morning Consult poll found that only 18% of registered voters believe that inflation will improve by the end of the year, and 75% think it will stay the same or get worse. Additionally, 70% think the overall U.S. economy is on the wrong track.
The Conference Board’s consumer confidence index fell to 97 in April, down from 103.1 in March, the lowest reading in 22 months. The expectations index, which tracks consumers’ short-term outlook for business, income, and labor market conditions, fell to 66.4 this month from 74 in March. A reading below 80 often signals a recession, which is cause for concern for President Biden.
Economist Dan North says that while inflation went down a little, it has stayed in a narrow band between 3% and 3.7% for almost a year, which is well over the healthy 2% mark set by the Fed.
The Fed has raised its interest rate target to the highest level since the dot-com bubble, and it’s uncertain when they will start lowering rates. If the inflation readings don’t show improvement, it could push back the first rate cut until after the November elections, which could further hurt President Biden. Higher rates make things like buying a home or taking out a loan much more expensive for voters.
