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‘People have apparently exhausted their savings’, say economists

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CLEVELAND, Ohio – As farmers in Northeast Ohio prepare for planting season, they face exorbitant costs.

The US Department of Agriculture says most fertilizer prices have more than doubled over the past year.

The cost of seed and diesel also increases and these higher costs will be passed on to you.

Building your dream home also costs more.

Right now, builders across the country are struggling to keep new homes affordable during supply chain and inflation issues.

The US Census Bureau says home construction costs rose 17.5% from 2020 to 2021, the biggest one-year jump since 19-70.

But, all is not bad.

The average gas price is down in Ohio.

According to AAA, gas costs $3.86 a gallon, down 10 cents from a week ago and more than 20 cents from a month ago.

And the battle against rising inflation is fought on two fronts:

First, consumers are trying to find the money to cover rising costs.

We see this impact on the savings rate, which is now below pre-pandemic levels.

“So people have apparently exhausted their savings,” said Kurt Rankin, senior economist at PNC Financial Services Group.

Second, the Federal Reserve is turning to interest rate hikes to rein in our spending and slow the economy.

“Essentially, 70% of the United States is run by workers who take home a paycheck but then pump it back into the economy. So if that slows down, the economy slows down and recession becomes a problem,” Rankin said.

Rankin said recreation and hospitality job creation in northeast Ohio is currently among the worst in the country, which could be a saving grace if the United States slips into recessionary territory. .

“The fact that Northeast Ohio has fallen a little bit, maybe that provides a bit of a cushion on which if there’s a downturn, there’s not as much of a pullback.”

Either way, Rankin, along with other economists, predicts that a host of stressors will surface. that will impact personal budgets in the months to come.

“You might see it in your mortgage rates, mortgage rates start to go up, you might see it in the credit card debt you’re paying, as your credit card debt increases and your employer decides not to borrow money to keep growing,” said Michael Goldberg.

Goldberg, of Case Western Reserve University’s Weatherhead School of Management, said now is a good time to crunch the numbers when it comes to your budget.

“There are these times when we as individuals look at how we are spending our resources,” Goldberg said.

While it may be tempting to maintain your spending levels during an economic downturn by using credit cards, Rankin advises against it.

“Interest rates are rising, and they will continue to rise,” Rankin said.

Both Rankin and Goldberg said the implication of rising interest rates will be felt within a year to a year and a half, which could mean an economic downturn in mid-2023.