Multiple challenges plague US economy

04:41 PM @ Monday - 10 June, 2024

The U.S. economy has been facing challenges from high debt burden, interest rates, and prices despite solid economic prints.

Despite the upbeat GDP growth and job creation figures in the country, ordinary people especially low-income minorities face a stark reality, grappling with soaring necessity costs.

Since the beginning of the COVID pandemic in March 2020, the costs of food at home and dining out have surged 24.6 percent and 25.6 percent, respectively, in the United States, data from the Bureau of Labor Statistics show.

The average price of Medium French Fries, McChicken, Big Mac, 10 Piece McNuggets Meal and Cheeseburger at McDonald's surged 141.4 percent in the past five years.

The average annual premium of full coverage auto insurance rose to 2,543 U.S. dollars in 2024, up 26 percent from the previous year, according to a report from Bankrate, a consumer financial services company based in New York City.

High inflationary pressures dented consumers' confidence and made them less willing to loosen up their purse strings.

U.S. Consumer Sentiment Index dived to 69.1 in May from 77.2 in April and 79.4 in March as consumers' year-ahead inflation expectation increased to 3.3 percent in May, according to survey results by the University of Michigan.

As many as half of all families in New York City lack enough income to survive without assistance from the government, family or community, according to a report by ABC7NY in April, citing studies by the United Way of New York City and the Fund for the City of New York.

Moreover, the 11 times hike in interest rates by the Fed from March 2022 to July 2023 has not driven down inflation to the target of 2 percent, but both corporations and individuals have started to feel the heat of high borrowing costs.

Higher than 7 percent mortgage rates worsened house affordability and sidelined many prospective home buyers from entering the housing market, according to a release by the Mortgage Bankers Association, the United States national association representing all facets of the real estate finance industry.

Americans' credit card balances hit a record high of 1.13 trillion dollars at the end of 2023 and the percentage of card delinquencies 90 days or more rose to 6.4 percent in the fourth quarter of 2023, according to data issued by the Federal Reserve Bank of New York.

The U.S. federal government is expected to pay as much as 870 billion dollars of interest in 2024, higher than defense spending in the year, and the interest payment is expected to top 1 trillion dollars in 2025.

The U.S. public debt outstanding now hovers over 34 trillion dollars, accounting for about 120 percent of the GDP and increasing by 11 trillion dollars from that in March 2020.

Moreover, the situation is not going to turn better before getting worse.

The U.S. budget deficit will total 1.5 trillion dollars in 2024 and increase to 2.6 trillion dollars in 2034, according to a report by the Congressional Budget Office in February.

Federal Reserve Chair Jerome Powell recently warned of an "unsustainable fiscal path" in the United States as the debt grows faster than the economy.

The United States should focus on reducing the budget deficit and the deficit would cause a problem at one point, said JPMorgan CEO Jamie Dimon in a recent interview with Sky News.

U.S. billionaire investor and hedge fund manager Ray Dalio expressed his concern that international investors' appetite for U.S. Treasury bonds may wane.