How Americans are adjusting to record inflation
SCOTT SIMON, HOST:
Now, for a larger look at how inflation may be affecting people across the country and the world, we're joined by NPR's Scott Horsley. Scott, thanks so much for being with us.
SCOTT HORSLEY, BYLINE: Good morning. Good to be with you.
SIMON: We just heard from people in Brownsville, some of the things they're doing without or forgoing and postponing. Does that sync with what you've seen elsewhere?
HORSLEY: You know, in some cases, yes. But overall, consumer spending has held up pretty well, at least so far. And that's important because, of course, consumer spending is such a big driver of the overall U.S. economy. Just a few days ago, the Commerce Department put out retail spending figures for the month of March. And it is interesting to see how people are coping. We know gasoline prices hit a record high that month. Gas prices jumped 18% from February, but spending at gas stations rose only half that much. So it does look as though people are putting fewer gallons of gas in the tank, maybe cutting back on their driving a bit. It's also possible that when they see the bill at the gas pump, they decide to skip the Slim Jim and soda pop inside the gas station.
SIMON: What about spending at the grocery store? Food is important to everybody.
HORSLEY: Of course. And we've seen a similar but less pronounced adjustment at the supermarket. Grocery prices rose 1.5% last month. Sales were up less than that. So it does seem people are compiling their grocery list a little more carefully, maybe trading down to cheaper brands or leaving some things out of the shopping cart altogether. The rise in grocery prices over the last year is the largest in four decades. And so that does have an impact on shoppers like Rebekah Lane. She's a mother of two in Thomaston, Maine.
REBEKAH LANE: I can walk out of the grocery store right now with two reusable bags, and it's $100. The money's not going as far.
HORSLEY: But even as Americans are cutting back their spending on gasoline and groceries, a lot of people are still spending pretty freely in other areas.
SIMON: Where, for example?
HORSLEY: You know, a lot of discretionary things. It is important to keep in mind that a lot of families built up significant savings during the pandemic. And last month there was a real jump in spending on sporting goods and electronics and clothing. People also ate out more. Now, online sales did fall in March by almost 6.5%, suggesting that maybe some people are tired of shopping from their living rooms while hunkered down. But as spring approached and the winter wave of pandemic infections retreated, it looks as though people were eager to get outside, maybe buy a new outfit or a new baseball glove. We're also seeing strong demand for airline tickets, even though airfares jumped nearly 11% between February and March.
SIMON: Of course, as I don't have to tell you, economists warn that high inflation poses a threat to the economy not only here, but around the world. What concerns do they have?
HORSLEY: Yeah. In the U.S., the Federal Reserve has started to raise interest rates in an effort to tamp down inflation. The Fed hopes to engineer a so-called soft landing, but that's not easy to do. And if the central bank hits the brakes too hard, that could hurt the economy. Lots of other countries are facing similar problems, and, of course, the war in Ukraine has made things even worse. The war is driving up prices for wheat and corn and cooking oil. Food economist David Ortega of Michigan State University says that's particularly challenging in places like North Africa and the Middle East, which are heavily dependent on the Ukrainian breadbasket, which is now under fire.
DAVID ORTEGA: While things feel pretty bad at home with regards to food prices, the situation is much more dire in other parts of the world.
HORSLEY: The leader of the International Monetary Fund says the war is just adding to the hardship around the world and dragging out the recovery from the pandemic that we've all been waiting for.
SIMON: NPR's Scott Horsley, thanks so much.
HORSLEY: You're welcome.
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