Americans sour on Donald Trump’s economy as affordability strains intensify

{"text":[[{"start":9.06,"text":"Working Americans are growing increasingly gloomy over Donald Trump’s economy as the president’s war in Iran intensifies an affordability crunch and forces them to dial back spending."}],[{"start":20.04,"text":"Consumer sentiment dropped sharply in August, according to data released by the University of Michigan on Friday, as older and poorer Americans in particular were squeezed by elevated fuel prices."}],[{"start":31.72,"text":"Separate numbers from the US Census Bureau on Friday showed consumers curbed spending in July as higher food and energy costs ate into poorer Americans’ budgets and a boost from tax refunds fizzled out."}],[{"start":43.72,"text":"“There are some people arguing that the K-shaped economy is over,” said Diane Swonk, chief US economist at KPMG, referring to how wealthier Americans have prospered despite spiralling costs of living. But Friday’s data emphasised “that is not the case”, she said."}],[{"start":58.72,"text":"“It’s hard on less affluent Americans. The reality is that inflation is just the most regressive tax that exists.”"}],[{"start":66.88,"text":"The conflict in the Middle East has triggered a burst of higher prices this year. Annual inflation hit a three-year high of 4.2 per cent in May. While data released this week showed it had receded to 3.4 per cent in July, for many Americans, day-to-day costs remain too high."}],[{"start":null,"text":"

"}],[{"start":83.04,"text":"The pace of price increases has put mounting pressure on the Federal Reserve to increase interest rates. Markets have grown increasingly concerned about the central bank’s ability to keep inflation under control, helping fuel a surge in long-term borrowing costs in recent weeks that has also pushed up mortgage rates."}],[{"start":100.2,"text":"Trump has insisted the economy is “booming” and said he inherited high inflation from the previous administration. He has also put pressure on grocery stores to curb prices for consumers and lashed out at energy companies for alleged price gouging."}],[{"start":114.32,"text":"But the head of the Boston Fed told the FT this week that poorer Americans were struggling to make “ends meet” as the war worsens cost-of-living strains."}],[{"start":123.24,"text":"The University of Michigan consumer sentiment index dropped 7.6 per cent to 51 in August, reversing course after two months of increases from the all-time low of 44.8 reached in May."}],[{"start":134.9,"text":"The shift was driven in part by an uptick in inflation expectations, with prices at the pump rebounding in recent weeks as the US-Iran war intensified. Consumers were bracing for a 4.3 per cent rise in prices over the next year, compared with 4.2 per cent in July and 3.4 per cent before the conflict."}],[{"start":155.8,"text":"Sentiment fell most sharply among lower-income groups, who pay a bigger proportion of their income on food and energy and therefore are most exposed to a rise."}],[{"start":166.12,"text":"“Elevated gas prices are disproportionately weighing on low-income consumers, whereas surging financial wealth and looser fiscal policy are offering a boost to high-income households,” said Sara Godfrey at Oxford Economics."}],[{"start":null,"text":""}],[{"start":180.6,"text":"Joanne Hsu, director of consumer surveys at the University of Michigan, said that while the “weakening in sentiment was pervasive across various demographic groups, notably large reductions were seen among older consumers, lower-income consumers and those without a college degree”."}],[{"start":197.2,"text":"“These groups are all particularly vulnerable to any erosion of purchasing power stemming from inflation,” she said."}],[{"start":203.68,"text":"In a warning sign for Trump ahead of November’s midterm elections, the decrease was strongest among Republicans, whose sentiment is now 19 per cent lower than before the conflict began and at its lowest level since he was elected for a second term."}],[{"start":217.76,"text":"Meanwhile, July retail sales fell 0.6 per cent over the previous month, according to the Census Bureau, the sharpest drop in more than a year. The pullback was driven in part by Amazon moving its Prime Day back to June this year, causing ecommerce sales to cool the following month."}],[{"start":235.08,"text":"But average spending over the two months was lower than May’s level."}],[{"start":238.86,"text":"Spending in grocery stores was down nearly 2 per cent versus last year after adjusting for inflation, as rising energy and food prices, as well as cuts to benefit programmes, force many Americans to dial back."}],[{"start":251.24,"text":"Analysts said that with the boost from tax rebates that allowed Americans to splash out in the first half of the year now having been exhausted, spending was likely to slide further in the months ahead."}],[{"start":261.84,"text":"“The lift to households’ cash flows from tax refunds now is gone, higher energy prices will continue to put pressure on their finances, the underlying trend in income growth is weak and the personal saving rate has little scope to fall further,” said Oliver Allen at Pantheon Macroeconomics."}],[{"start":277.8,"text":"“[The data] suggests a sharper slowdown in spending lies ahead.”"}],[{"start":287.28,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1786922133_2877.mp3"}