On The Money — Why grocery prices keep going up
We explain why the price of food keeps rising — and it’s not just inflation. We’ll also look at how high price growth is giving Democrats low hopes of keeping the House and how mortgage rates are putting home purchases out of reach.
But first, Europe is dealing with a bout of rising COVID-19 cases.
Rising grocery prices: Why prices keep jumping
Americans continue to pay more at the grocery store as surging food inflation shows no signs of slowing down.
Grocery prices rose 13 percent over the last year and 0.7 percent in September alone, outpacing the annual 8.2 percent inflation rate for all consumer products, according to the most recent Labor Department data.
- The price of fruits and vegetables increased by 10.4 percent annually, while milk rose 15.2 percent and eggs soared 30.5 percent.
- The Federal Reserve’s interest rate hikes are slowing demand for discretionary goods, but people will always need to buy food, limiting their impact on costs.
- That’s demonstrated by recent price drops in the housing and car markets, but not at the grocery store.
The problem: The war in Ukraine, which spiked global wheat and fertilizer prices, continues to rage, while the food supply chain is still being rattled by poor rail service and a shortage of truck drivers and refrigerated trucks. It’s also unclear whether extreme droughts that shrank this year’s yields will alleviate or if they’re becoming the new normal.
Karl explains here.
LEADING THE DAY
Darkening economic outlook spells trouble for 2022 Democrats
President Biden and Democrats are facing serious political headwinds driven by high inflation, an erratic stock market and deepening recession fears as they attempt to defend their majorities in the House and Senate.
- The president banked on a massive economic rebound powering his party to another sweep of Congress two years ago when he launched his ambitious recovery plan, deploying trillions in dollars to support the recovering job market and struggling households.
- But the U.S. economic outlook is once again darkening.The latest inflation report could cost the president and his party dearly, all while deepening the risks facing the US economy.
- Consumer prices rose 8.2 percent over the past 12 months and 0.4 percent last month alone, according to consumer price index data released Thursday by the Labor Department.
The financial squeeze is also straining voters’ faith in Biden and Democrats’ ability to lead the U.S. out of the mire.
Sylvan breaks it down here.
TOO MUCH TO BEAR
Skyrocketing inflation is raising mortgages, putting first homes out of reach
A new report showing inflation rising again in September is just the latest bad news for new homebuyers, who are increasingly seeing the cost of a first home pushed out of their reach.
- The Consumer Price Index released from the Labor Department Thursday found that inflation increased in September by 0.4 percent and 8.2 percent over the past 12 months.
- As a result, buyers are going to find it increasingly difficult to obtain a loan that enables them to purchase a quality home amid sky-high prices and mortgage rates.
Buying a home in January 2021 required roughly 19 percent of the median household income to afford the average home, Andy Walden, vice president of enterprise research at the data analytics company Black Knight told The Hill.
“Today, with 30-year rates nearing 7 percent, it requires 39 percent — more than twice the share — of that same median household’s income to make the mortgage payment on that same average home purchase,” Walden said in an email. “That’s simply made it unaffordable for many potential buyers, significantly shrinking the pool of potential buyers in the market.”
The Hill’s Adam Barnes has more here.
White House says 8 million Americans have applied for student loan debt forgiveness
President Biden on Monday lauded the official launch of student loan forgiveness applications, with the White House touting that more than 8 million Americans have already applied for the administration’s program during an online soft launch that began late last week.
“Today marks a big step, among others, that my administration is taking to make education a ticket to the middle class that folks can actually afford,” Biden said. “The new student loan application is now open. If you have federal student debt, please visit StudentAid.gov. It’s easy, simple and fast and it’s a new day for millions of Americans all across our nation.”
- Biden said the website, which soft launched on Friday, has handled applications “without a glitch or any difficulty.” The president, who was joined for the announcement by Education Secretary Miguel Cardona, called the portal a “game changer” that would allow the government to better serve the public.
- The beta testing phase that launched on Friday allowed applications to be submitted, but they were not processed until the formal launch.
The Hill’s Alex Gangitano and Brett Samuels dig into this here.
Good to Know
Sixty-three percent of economists believe a recession will occur in the next year, marking the latest increase in such a prediction, according to The Wall Street Journal’s economist survey.
Forty-nine percent predicted a recession in The Wall Street Journal’s July survey, and the latest poll marks the first time since July 2020 that a majority said a recession would occur in the next year.
Other items we’re keeping an eye on:
- A new app featuring content from pundits across the political spectrum is launching, and its founders say it will fill a gap they see in the audio media world.
- House Democrats are moving to reaffirm the Food and Drug Administration’s authority to preempt state law and ensure patients continue to have access to reproductive health care products.
That’s it for today. Thanks for reading and check out The Hill’s Finance page for the latest news and coverage. We’ll see you tomorrow.