Wednesday, May 28, 2008

The Multi-Class Squeeze Economy

Last week M bought some groceries and came back flabbergasted at the prices. And last night we ordered some take out from a taqueria, and on the walk over we passed an empty Blue Ribbon and Stone Park and the cheap Mexican joint was packed. You know it's bad when the fancier places are unusually empty, and the cheap eats places are hopping. Welcome to the universal economic squeeze.

CNN Money has an interesting take on it in Making a good living, but still feeling strapped.

Hoyt of argues that every income strata is feeling it. The wealthy are hurting from the roiling stock market, the middle class from falling home prices and working folks from rising prices.

Food prices, for instance, climbed 5.1% over the past 12 months and April's 0.9% rise was the largest in 18 years, according to the Consumer Price Index. Gas, meanwhile, hit its highest recorded price of $3.937 on Monday, up nearly 21% from a year ago and 9.7% over the past month, according to AAA.

That's right, last month's food prices spike was the highest in eighteen years. Egads.

The interesting thing about the economy is the point of departure between consumer perception and the perception of the economists. Consumers are pretty much freaking out (one man in the article points out that he didn't mind penny pinching to send his kids to college, but not to buy eggs), while the economists are mucking about the statistical wash of price indexes and the increase or decrease of important numbers. Basically, I don't think we're walking around thinking are we or are we not in a recession. Sure, I know the debatable criteria for real economic recession, but I also know that my place in the economic food chain is in a steep recession. And I'm not the only one.

Suddenly, people who aren't used to looking at certain bills are getting shocked from their eye sockets to their pockets. I mean, I looked at my bill from the Associated supermarket, but not like I do now. I'm running around the apartment turning off random lights. And I think that I finally might just put a dent on that lifelong project of eating down the pantry.

What does this mean for the larger economy? I don't know, but for now I think the war of perception is being won by us, the consumer.


blixity said...

i think at some point, consumer fears start to become self-fulfilling. the more people freak, the more they stop spending. this of course puts a squeeze on capital flows overall. and fancier places are emptier perhaps also because many are frequented by expense accountholders whose bosses are now working in the shadow of bear stearns' ruins.

Emily @ Taking Charge said...

It is really scary, especially with so many things going up at the same, gas, foreclosures, etc. But Blixity has a good point -- I wonder if any of this is fueled by us? Hmph. Well, it does seem that more and more people are being impacted by these rising prices. We just commissioned a poll, which found out that over half of Americans are already cutting back on visiting family and friends. I think if prices keep going up like this, businesses are going to have to start letting more people telecommute.

PiggyBankBlues said...

i totally agree that the perception becomes self fulfilling, for both consumers and wall street, at some point. i just think that point has been inched further along by reality. at this point our perception is dead on, i think that at some future point it might hold us back, but there's no real silver lining right now. i'd love to be wrong.