Though U.S. economic growth hit its fastest growth rate in nearly 40 years on Thursday, roughly half of Americans surveyed in a recent Gallup poll said that rising prices have caused them financial hardship, while a record number also predicted that inflation would only get worse.
The U.S. economy grew 6.9% in the fourth quarter—despite surging inflation—thanks to an uptick in consumer spending, exports and private investments, the government said Thursday.
For the full year, U.S. GDP grew 5.7%—its fastest pace since 1984, but the American public remains split on whether economic growth will increase or decrease in 2022, according to a recent Gallup poll.
Many Americans are still struggling with the effects of rising prices, however, as inflation is at nearly 40-year highs.
A record 79% of Americans think inflation will continue to rise in 2022, according to the Gallup poll, with half of survey respondents predicting that surging prices will increase by “a lot” more.
The current expectation from American households is the highest ever measured in the poll—beating the previous record of 76% in September 2005, according to Gallup.
What’s more, in a separate Gallup survey, roughly half of Americans said rising prices due to inflation have already “caused hardship for their family” and hurt their finances, including 9% who said it has caused “severe” hardship.
Lower-income Americans have been hit hardest by surging inflation. Two-thirds of Americans with an annual household income of less than $40,000 said they have experienced hardship, including 20% who described it as “severe,” according to Gallup. Those statistics compare with just over 50% of middle-income and 32% of upper-income families who said they have experienced at least “moderate hardship.”
While Americans remain pessimistic about surging inflation, many respondents were generally optimistic about the stock market and unemployment, according to the survey.
What To Watch For:
The International Monetary Fund on Tuesday warned that the global economic recovery will be worse than expected due to the ongoing pandemic, rapid inflation and supply chain constraints. Citing all of these issues as well as the Fed’s removal of stimulus, the IMF downgraded U.S. GDP projections from 5.2% to 4% in 2022.
After a 3.4% decline in 2020, when pandemic shutdowns sent the economy into a recession, U.S. GDP rebounded strongly in 2021. Economic growth blew past expectations for the full year, jumping 5.7%, the highest reading since 1984. The economic growth was in large part thanks to rising consumer spending, a jump in exports—including industrial supplies, food and beverages—and inventory investments by motor vehicle dealers. Meanwhile, stocks have swung wildly this week, with the S&P 500 briefly falling into correction territory—at one point 10% below its record high—amid surging market volatility. The S&P 500 is on pace for one of its worst starts to the year ever. Investors remain nervous as the Federal Reserve tightens monetary policy and removes pandemic-era stimulus in a bid to fight surging prices. The central bank announced on Wednesday that it would begin raising interest rates “soon,” starting in March, with three rate hikes forecast in 2022. Fed Chairman Jerome Powell added in a press conference that there was also “quite a bit of room” to further raise interest rates before harming the labor market.