▲ A gas station in Brooklyn, New York
Ahead of the US midterm elections, soaring living costs compounded by rising energy prices and loan interest rates are drawing intense attention for their potential impact on voter sentiment.
The Wall Street Journal (WSJ) reported on September 18 (local time) that ahead of the midterm elections that will determine control of Congress, nearly all costs—from buying a home to pumping gas into a car—have become more expensive than just a week ago.
The US Consumer Price Index for August rose 3.4% compared to the same month last year.
Conversely, the average hourly wage growth rate over the same period stood at 3.1%, marking the fifth consecutive month that wage growth lagged behind inflation.
The burden felt by homebuyers is also rapidly growing.
According to US state-backed mortgage company Freddie Mac, the average interest rate on the 30-year fixed mortgage rose this week to 6.95% from 6.76% the previous week.
This is the highest level since January of last year, just before President Donald Trump took office, bringing it tantalizingly close to 7%.
In early 2022 alone, this rate hovered just above 3%.
The yield on the 10-year US Treasury note, which affects long-term borrowing costs for consumers and businesses, also surpassed 5% during trading this week for the first time since 2023.
With the US Federal Reserve having raised benchmark interest rates for the first time in about three years and leaving the door open for additional hikes within the year, households are likely to face borrowing cost pressures for the time being.
Surging energy prices are also driving up the cost of living as perceived by Americans.
In particular, diesel prices hit an all-time high the previous day, averaging $6.40 per gallon nationwide in the US.
Compared to $3.71 a year ago, this represents an increase of more than 70%.
On the other hand, macroeconomic indicators remain robust.
The unemployment rate holds low at 4.1%, and US household net worth in the second quarter of this year reached $186 trillion, an increase of $26 trillion from the end of 2024.
Retail sales in August also beat market expectations.
However, the WSJ diagnosed that this macroeconomic robustness is not translating into improvements in households' perceived economic conditions.
The misery index, devised by economist Arthur Okun, combines the unemployment rate and the inflation rate. It currently stands at 7.5, up from 6.7 in October 2024.
Todd Vasos, CEO of US discount retailer Dollar General, stated at a Goldman Sachs investor conference this week, "Even middle- to upper-middle-income consumers are behaving much like low-income consumers these days."
He noted that among consumers with annual household incomes around $100,000, comments such as "I no longer feel like I am in a high-income bracket" are increasingly common.
The WSJ pointed out that as the cost-of-living burden on Americans grows, voters' evaluations of the economic performance of President Trump and the Republican Party could become crucial in these midterm elections.
Republican strategist David Winston said, "Ultimately, whether voters feel their personal economic circumstances have improved is the core criterion for evaluating the economic performance of President Trump and the Republican Party."
(Photo: Getty Images)
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