Inflation is cooling - but Americans' concerns about it are hotter than ever, by one measure

Andrew Keshner

84% of TransUnion survey respondents said inflation was their top household-finance concern in the second quarter

Wall Street investors are cheering an inflation report showing no monthly increase in the cost of living during May - but good luck convincing consumers that the flat numbers are positive news.

Americans' worries about inflation have hit their highest level since two years ago, when TransUnion (TRU) first started measuring it, according to the credit-reporting bureau's latest quarterly survey of consumers' mood and finances.

More than eight in 10 people, or 84%, said inflation was their top household-finance concern in the second quarter, TransUnion researchers said Wednesday. That's up from 82% in the first quarter and 79% in the second quarter of 2023.

Wednesday's consumer-price index showed a cooler-than-expected inflation reading, with no overall increase from month to month and a decline in the annualized rate to 3.3%, from 3.4% in April and 3.5% in March.

Last May, the year-over-year rate of inflation was 4%, dropping from 4.9% the previous month.

But consumer concern doesn't always march in lockstep with inflation rates, noted Charlie Wise, head of global research and consulting at TransUnion.

"Consumers have a difficult time differentiating between inflation and prices," he said in an interview ahead of the CPI report's release. "Inflation is a rate of change; prices are an absolute."

With prices, it's easier to focus on the hard numbers, he said. That's especially true when the price increases are recent enough for people to remember what they used to pay a few years ago for things like groceries, rent and other expenses, he added.

"I think what consumers are realizing is that this is not a temporary factor," Wise said. "This is a fact of life."

The power of prices is also on display elsewhere: Businesses say they are having to contend with pushback from price-sensitive customers, according to the Federal Reserve's latest Beige Book survey. Major retailers like Target (TGT), Walmart (WMT) and Amazon (AMZN) are also trying to lure shoppers with some price rollbacks.

The May CPI report contained some bright spots. Grocery prices showed no change from April to May and a 1% year-over-year rise. Gasoline prices decreased 3.6% in May, though they were still up 2.2% year over year.

Drivers paid an average $3.45 for a gallon of gas on Wednesday, down from $3.59 a year ago, according to AAA.

And yet, respondents to the latest TransUnion survey said the daily costs they were most worried about included groceries (84%) and gasoline (66%).

There's been a 30% increase in food prices since 2020, according to an analysis by research firm TS Lombard. And it's recent price increases that most people focus on, rather than the rate of price increases more closely watched by economists, the report noted.

Of course, TransUnion is just one of many sources offering a look at consumer mood - but other surveys have also captured the fracturing between high-level economic data and people's personal experiences.

Nearly three-quarters of people said last month that the inflation rate was increasing, according to a recent poll. The same survey showed that half of respondents believed the S&P 500 SPX stock-market index was down for the year, when it's actually up 13.9% this year to date.

Elsewhere, consumer confidence has shown signs of getting rosier, for now. In May, the Conference Board's gauge rebounded for the first time in three months, though it may have been buoyed by favorable views of the job market. The U.S. economy added 272,000 jobs last month, handily beating estimates for 190,000 new jobs.

"Will consumers suddenly feel relieved from the burden of elevated prices? No," Bankrate senior economic analyst Mark Hamrick said after Wednesday's inflation-data release. "But they are supported by a still-robust job market that supports employment, and wage gains rising above the recent pace of inflation."

But the economy's strength may only offer so much comfort, Wise said.

"Even though inflation is coming down," he said, "people are really struggling with this idea that we are now in a permanent state where things just cost us more."

-Andrew Keshner

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-13-24 0550ET

Copyright (c) 2024 Dow Jones & Company, Inc.