Source: Jin10 Data

Although Americans' concerns about an economic downturn have eased, new concerns about inflation have re-emerged.

According to a recent report from TransUnion, one of the three major credit reporting agencies in the United States, concerns about inflation and interest rates have reached their highest level in two years.

TransUnion's consumer pulse research found that although Americans' purchasing power has increased against the backdrop of cooling inflation data and a strong job market, 84% of adults still list inflation as their top concern, followed by housing prices and interest rates.

Charlie Wise, TransUnion's Senior Vice President and Global Research and Consulting Director, said, "The process of lowering the inflation rate continues to make positive progress." However, "consumers' perceptions continue to deteriorate."

Is the United States in a "mood recession"?

According to TransUnion's report, more than half (55%) of Americans are optimistic about their household financial condition in the next year, partially due to confidence in the labor market and continued wage increases.

However, although consumer confidence has improved somewhat, workers are still somewhat dissatisfied with the economic situation. The disconnect between strong overall economic conditions and weak household perceptions is also known as a "mood recession."

It is certain that prices are still rising, just not as quickly as before.

According to data from the US Bureau of Labor Statistics, the Consumer Price Index (CPI) in May rose 3.3% year-on-year. This figure is lower than the peak of 9.1% during the epidemic in June 2022. The CPI is a key inflation indicator that measures the average price of a basket of consumer goods and services.

"The price level we're seeing now is much higher than it was two or three years ago, and it feels terrible," Wise said.

He added, "From filling up your gas tank to paying rent to buying everyday items, most consumers are spending more than they used to. If consumers use credit cards to make these purchases, their interest rates will be even higher, so costs are also rising for those who hold credit cards."

TransUnion's report also found that the gap between those who believe their household income keeps up with inflation and those who believe it does not is widening.

Joyce Chang, JPMorgan's Global Research Chair, said at the CNBC Financial Advisor Summit last month: "If you're a homeowner or have financial assets, you're doing great, but you're ignoring a large segment of the population."

"Wealth creation has been concentrated among homeowners and high-income earners, but about a third of the population has been left out - that's why there's a disconnect between people's perceptions and the reality shown by the data," Chang said when discussing the situation in recent years.

Credit card consumers are hit hard

Meanwhile, the US Federal Reserve has raised interest rates 11 times since 2022, coupled with rising inflation, which has hit the US working class particularly hard.

Many families have exhausted their savings and are increasingly dependent on credit cards to make ends meet.

And credit cards remain one of the most expensive ways to borrow money. According to Bankrate data, the average credit card charge is almost 21%, close to its historical high.

At present, these interest rates may remain at current levels, which also means that there may not be much help in the future for those struggling in an economic downturn.

Greg McBride, Chief Financial Analyst at Bankrate.com, said,"Interest rates are unlikely to drop very quickly, nor are they likely to provide meaningful relief to borrowers quickly enough."

McBride recommends that consumers,"utilize zero-interest credit card balance transfer promotions, shop around for lower fixed-rate personal loans and home equity loans, and use as much income as possible to repay debts as quickly as possible."

Editor/Lambor