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Inflation causing people to spend more on essential items, less on other things

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Posted at 1:40 PM, Oct 28, 2022
and last updated 2022-10-28 14:51:54-04

Inflation is showing signs of easing, but people are still spending more money to get less stuff than they were a year ago.

Overall spending is up 6.2% compared to last year, according to a federal report out today.

That is driven by the cost of food and energy, both of which are up double digits compared to last year.

"What it results in is families having to make choices, and sometimes these are very difficult choices," said Elisabeth S. Curtis, a professor at Dartmouth University.
"We're not going to take a family vacation this year because we really need that extra couple hundred bucks every month, which I normally would've put away for vacation savings, now I'm going to have to use it for groceries or gasoline."

Those price pressures have an impact on our bank accounts. The personal savings rate is near a five-year low.

And credit card debt is back to pre-pandemic levels. It could be a sign that people feel confident. It could also mean they are running out of cash.

“If we continuously see prices rising at the rates they're rising, that just makes things even more uncertain, more difficult to predict, and households have to make choices. That's what is costly about inflation is just the uncertainty around it," Curtis said.

There is one major sign that inflation is slowing down. Over the last three months, prices are up. 5% that's the lowest three-month inflation rate since 2020.