The cost of groceries in the U.S. has reached such heights that many Americans are resorting to debt to keep their kitchens stocked. This trend is causing financial instability for many households.
What Happened: A study conducted by the Urban Institute revealed that the rising prices of groceries, a consequence of overall inflation, have pushed many families to use their savings, credit cards, buy now, pay later installment programs, or payday loans to cover their grocery bills in 2023, reported CNBC.
While these methods can provide temporary relief, they often lead to long-term financial instability. Kassandra Martinchek, a senior research associate at the Urban Institute, pointed out that despite the slowing rate of price increases, households are still spending more on groceries than they did the previous year.
This suggests that many are relying on sources other than their income to meet their basic needs. "That might mean that folks are having to rely on liquidity sources other than their income to be able to meet their very basic needs, their food needs," she said.
The issue isn’t limited to the most financially vulnerable. Consumers across the board have been grappling with higher food prices since 2021, a struggle that has been exacerbated by the expiration of pandemic-era aid.
The average individual’s Supplemental Nutrition Assistance Program benefits were reduced by approximately $90 per month after enhanced allotments expired in March 2023.
About 70% of all grocery transactions are made using credit or debit cards, the research found. These payment methods carry risks, particularly for consumers who cannot pay off their balances in full. In 2023, the average annual percentage rates for credit cards rose to 22.8%, the highest rate on record.
Why It Matters: The current economic climate in the U.S. has been a topic of concern for some time. Jim Cramer, a prominent financial expert, recently emphasized the strength of the economy and advised investors not to expect swift rate cuts from the Federal Reserve.
However, other experts, such as economist Mohamed El Erian, have expressed concerns about the U.S. economy’s ability to sustain its growth momentum in the face of domestic political divisions and global uncertainties.
These concerns are reflected in the experiences of everyday Americans, as highlighted by investment strategist Luke Lloyd, who warned about the erosion of the American dream due to current economic policies.
Despite these challenges, there have been some positive signs, such as the recent slowing of inflation and weaker-than-expected consumer spending, which have bolstered rate-cut convictions among traders.
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