Moody's Analytics reveals that the average American household spent $709 more in July compared to two years ago for the same goods and services. In comparison to the previous year, households spent $202 more this July. THE CAUSE:

Mark Zandi, Chief Economist at Moody's Analytics, emphasized the considerable economic ramifications of prolonged high inflation, stating, "High inflation of the past 2+ years has done lots of economic damage." The surge in spending primarily stems from soaring housing costs, with families also allocating more funds to groceries, vehicle purchases, maintenance, insurance, and recreational services such as cable. While paychecks have grown over the past two years, they have not kept pace with the rising cost of living. This means that real earnings have essentially remained stagnant at 2019 levels. Zandi notes that they would have been higher if not for the pandemic and other geopolitical events.

There is positive news on the horizon: Wages are finally starting to surpass the rate of inflation. Moreover, consumer price growth has notably eased. The government's recent report indicates that July's price increase was 3.2% compared to the previous year, a figure lower than expected. Economists at Bank of America view this report as "encouraging" and hold the view that the trend of inflation softening is genuine and not a temporary phenomenon.