Inflation ‘is absolutely killing us,’ Trump says. Here’s which prices are still rising fast.

Inflation ‘is absolutely killing us,’ Trump says. Here’s which prices are still rising fast.

Inflation is still top-of-mind for the American consumer — and it was first on the list for the presidential debate between President Joe Biden and former President Donald Trump on Thursday.

The candidates kicked off their first match by discussing the state of the U.S. economy.

Biden defended his work to lower consumer prices, but added that there’s “work to be done.”

“Working class people are still in trouble,” he said.

Trump responded that inflation was still “killing our country.”

“It is absolutely killing us,’ Trump added.

Inflation has slowed significantly over the last couple of years: The consumer price index, which measures the changes in costs of everyday goods and services, was 3.3% in May. That’s down from a June 2022 peak, when prices shot up 9.1% on a year-over-year basis.

How much have prices increased under Biden? 

Prices have risen 19.3% since Biden took office, according to an analysis by Bankrate, compared to a 5% cumulative rise during Trump’s term.

The rate of inflation is often impacted by factors outside the president’s control: supply-chain disruptions or the policy decisions of the Federal Reserve, for example. But the price increases — and their negative impact on household finances — have posed a significant political challenge for Biden.

Consumers sense that the economic picture is improving, said Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, a widely-used gauge of Americans’ perceptions of the economy. But their frustration with the cumulative impact of rising costs remains.

“There’s two things that they’re observing: one, that things are a lot better than two years ago. But two, things are still quite painful on the price front,” Hsu said.

Here are four budget categories where Americans are still feeling the pinch of higher prices.

Rents aren’t rising as fast — but they’re unaffordable for many 

Rent has outpaced the broader inflation rate for nearly two years, according to consumer price data from the Department of Labor. In May, rents were up 5.3% from the prior year, compared to a 3.3% overall rate of inflation.

That data tends to lag behind the current rental market, where rent growth has cooled significantly over the last year, said Igor Popov, chief economist at the rental site Apartment List.

“Over the last year, rents are more or less flat,” he said.

Still, a similar dynamic is playing out in the rental market as in the broader economy, Popov said: rents aren’t rising as fast as they were a few years ago, but that doesn’t mean consumers have stopped feeling the pinch of higher housing costs.

“If someone’s thinking ‘Is my rent higher than it was last year?’ — the answer, in most parts of the country, is no,”  he said. “But the pandemic housing boom has shifted us to a new level.”

The housing market boomed beginning in 2021, Popov said, lifting the average rent 17% nationally within one year — so many consumers are still paying much more for housing than they did pre-pandemic. And while rents have cooled, they’re now at a level that many people struggle to afford. A record share of renters spend more than 30% of their income on housing, an amount that’s considered unaffordable.

Buying a home is also a challenge, as record-high home prices and elevated mortgage rates have made homeownership too expensive for many first-time buyers.

“From a renter’s perspective, it’s like we’ve stopped the bleeding but still have the bruise,” Popov said.

Car insurance is up 20.3% from a year ago

The cost of insuring your car is one monthly bill that has shot up over the last year: the price of motor vehicle insurance was up 20.3% over the last year, according to data from the Bureau of Labor Statistics.

“There’s about a half dozen different contributors to that,” said Mark Hamrick, senior economic analyst for Bankrate, including an increase in claims, the rising cost of car repairs and more frequent extreme weather events that can damage vehicles.

Other costs of car ownership — such as the price of repairs or the interest rates on auto loans — have also gotten pricier recently. Prices for motor vehicle repairs and maintenance increased 7.2% over the last year, the latest CPI report showed.

Hamrick doesn’t expect those costs to drop significantly anytime soon.

“Cars aren’t getting [much] less expensive and it’s probably not going to get less expensive to repair them either,” he said.

Electricity costs were up 5.9% in May

The cost of electricity was up about 5.9% in May from the previous year — and, as the hottest months of the year approach, consumers’ monthly power bills are likely to only get higher.

Americans are expected to pay record amounts to keep their homes cool this summer, thanks to higher costs and higher temperatures.

The average cost to cool a home in the U.S. from June through September is expected to hit $719 this year, up from $661 the year prior, energy researchers reported this month.

Eating out

The cost of food away from home has also outpaced the overall inflation rate, with prices rising 4% over the last year. That’s faster than the increase in the price of groceries, which increased just 1% over the same period.

Some consumers – particularly those on the lower end of the income spectrum — have opted to cut back on their restaurant spending as restaurant prices continue to rise.

Only the highest earning consumers are dining out more often than they did pre-pandemic, according to Circana, a firm that tracks consumer goods. Households earning more than $200,000 annually were the only group that spent more money in restaurants in 2023 than in 2019, according to the company’s recent data. Those earning less than $45,000 pulled back the most.

Companies have started to feel those effects: McDonald’s and Starbucks reported sluggish first quarter sales. Some chains have responded by lowering their prices or offering new discounts, like McDonald’s $5 value meal.

The price of food — including groceries and food purchased away  from home — is “still very top of mind for people,” Hsu said. The university’s survey includes an open-ended question that asks consumers to evaluate their personal finances compared to a year ago — about 20% of those responses mention the cost of food, she added.

Inflation versus affordability

Here’s the upshot on consumer prices: the inflation picture has improved significantly during Biden’s last two years in office. Prices aren’t increasing as fast as they were two years ago, and consumers are better off for it.

That doesn’t mean they’re happy. The pace of price increases is one issue, Hamrick noted. Affordability is another.

“Where prices end up is where the rubber hits the road for consumers, and that’s where this agitation is centered,” Hamrick said.

The cost of living was only one political issue on the docket during Thursday’s debate. Trump and Biden also discussed immigration, abortion rights and the Israel-Hamas war.

“I don’t think the issues of inflation and affordability are going to go away,” Hamrick said. “But they might at some point become less urgent for some voters. And then the question becomes: What else do they focus on?”

How have higher prices affected your life and financial decisions? MarketWatch wants to hear from readers about their experiences. You can write to us at [email protected]. A reporter may be in touch.