Higher inflation brings lower standard of living

With prices up and wages flat, consumers have to make do with less
ANALYSIS
By John W. Schoen, MSNB

Last Thursday's report on consumer inflation helps to confirm what many American households have suspected for months — that rising prices are forcing consumers to lower their standard of living to make ends meet.

U.S. consumer prices shot up faster than expected in July, fueling the biggest year-over-year jump in more than 17 years, according to the latest government data. Prices were 5.6 percent higher in July than they were a year earlier. Energy prices were up 29.3 percent for the year and food costs were 6 percent higher.

Excluding volatile food and energy items, the so-called core CPI rose 0.3 percent in each of June and July, slightly above forecasts for a 0.2 percent gain in July. On a year-over-year basis, core prices rose 2.5 percent in July, slightly more than the 2.4 percent rise that was forecast.
A separate set of data showed just how hard those prices rising are hitting household budgets. After adjusting for inflation, the average weekly paycheck dropped by 0.8 percent in July from June, extending an ongoing slide in real income. That left real earnings 3.1 percent lower in July than they were a year ago.