Inflation is falling. Why aren’t people noticing?

Inflation is at its lowest level in nearly two years, but Americans aren’t feeling much better.

New figures released Wednesday show that inflation eased sharply in March, with prices inching up 0.1% from a month earlier and 5% from a year ago. But another key measure that strips out food and energy prices came in hotter, increasing 5.6% year-over-year.

Although inflation has slowly cooled from last summer’s highs, price pressures continue to feel like an uphill battle for consumers, politicians and policymakers alike. Many say recent strides have been too spotty to offer much relief, even as annual price growth has slowed from 9.1% to 5%.

“Inflation may be gradually coming down, but people aren’t feeling it yet,” said Mickey Levy, chief Americas economist for Berenberg Capital Markets. “They’re going to the grocery store, gas station, restaurants, and still seeing prices edging up. There is growing frustration about persistence of inflation.”

Indeed, Americans’ expectations for inflation rose last month for the first time since October, according to survey data from the Federal Reserve Bank of New York released this week. Consumers now expect the U.S. economy to end the year with 4.7% inflation – a higher reading than the 4.2% rate they’d predicted in February. Political polls also consistently show Americans are feeling glum about prices, with the majority saying they view the economy as “poor” or “somewhat poor.”

Part of the disconnect, economists say, stems from the nature of recent disinflation: Energy costs, which have fallen 6.4% in the past year, have led much of the cool-down. But consumers are used to fluctuating gas prices and other utility bills – which means they may be less likely to view those lower costs as a noteworthy economic victory. Plus, oil prices are back to six-month highs.

Meanwhile, many essentials are getting disproportionately more expensive. Electricity, for example, costs 10.2% more than it did a year ago, while food and housing are both up more than 8%. Grocery staples like cereal, bacon and rice, which briefly got cheaper, are becoming more expensive again.

“Inflation is very individual: Everybody experiences it in a very different way,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “Us geeks and pundits might obsess over the month-over-month reading – two-tenths of a percentage point versus four-tenths – but that’s not how most people experience inflation. They think of it in terms of how much they spend when buying food or paying rent.”

And, she added, “the bottom line is: Prices are still up. They might be rising at a descending rate, but the average consumer still sees that things are getting more expensive than they were.”

Americans’ views on inflation are closely tied to the whims of fuel costs, which have recently edged up after months of decline. After hitting an all-time high of $5 a gallon in June, national gas prices dropped to $3 a gallon in December but have since bounced back up to $3.60 a gallon, according to AAA. There are also growing fears that prices could spike even more in coming months, following last week’s announcement that a number of major oil exporters, including Saudi Arabia, will significantly cut production this year.

Higher fuel prices – which also drive up the cost of making and transporting goods – could threaten the progress that’s already been made in bringing down inflation.

“When it comes to inflation, I haven’t seen any spikes but I don’t see any improvement either,” said Juan Soto, president of IT Impact, a custom software developer in Chicago that has raised prices by 20% in the past year. “My insurance costs are going up, labor costs are going up. This recent price hike in gasoline isn’t helping anybody. Just when you think it’s easing up a little bit, things get worse again.”

Stubborn inflation reinforces a lingering concern for officials at the Federal Reserve: The longer price growth stays elevated, the greater the risk that consumers and businesses will begin expecting such increases to persist, creating a self-fulfilling cycle that would present a more lasting challenge for central bankers.

The persistence of inflation also poses a political challenge for the Biden administration, which must stress it is working on resolving Americans’ key economic frustration without ignoring the risk that too fast a slowdown could tip the economy into recession.

Democrats dramatically outperformed expectations in the 2022 midterm elections, fueling optimism within the party that fears about inflation’s impact on their electoral fortunes had been overblown. But some pollsters note that other issues – such as the backlash against the Supreme Court’s repeal of Roe v. Wade, and ongoing opposition to former president Donald Trump – were also top of mind for voters, and may have masked the potency of rising prices as a political force.

That could change in the 2024 presidential election. The public’s anger over inflation appears to be white-hot, with numerous polls continuing to show widespread disapproval both about the economy and Biden’s management of it. In a Gallup poll released at the end of January, 32% of Americans approved of Biden’s handling of the economy, with two-thirds of the country disapproving – lower marks than the president’s handling of foreign affairs, energy policy, and the environment, Gallup found.

Even the dramatically falling pace of inflation over the past year has done little to lift the president’s standing, according to a range of polls released in recent weeks. A CNN poll released Friday, for instance, found that more than 70% of the U.S. population sees the economy as “poor” or “somewhat poor,” similar to levels seen in the aftermath of the Great Recession when unemployment was still very high. The issue consistently rates as the first or second most important problem facing the country.

“People don’t necessarily blame their congressman for the economy, but they certainly blame the president,” said Celinda Lake, a Democratic pollster who worked for Biden in the 2020 election. “The pessimism is still showing up in huge numbers in every poll.”

In a statement, the White House pointed to polling suggesting voters prefer Democrats’ solutions to inflation over the GOP’s. Administration officials say they are confident the contrast is in their favor. “Our agenda lowers health care and energy costs for working families and reduces the deficit by making the superwealthy pay their fair share,” the statement said. “We welcome that contrast since polls show our agenda is the winning one – and as we make continued progress against inflation, which is at the lowest annual rate in almost two years.”

The Fed’s ultimate goal is to get year-over-year inflation down to 2%, which many economists expect will take until at least 2025.

“Things are pointing in the right direction, but that’s not to say disinflation will happen in a linear fashion every month,” said Sonders of Charles Schwab. “That’s the rub: We’re going to see fits and starts on the way to something closer to the Fed’s ultimate target.”

At Prairie Market in Paullina, Iowa, co-owner Laura Palmers says food prices are gradually coming down. The grocer’s warehouse sends price changes every Monday, and now instead of 400 items going up in price, it’s just 30 to 40 of them, she said. At the same time, the store is taking other steps – such as washing its own aprons and towels instead of paying a laundry service, and halting advertising – to cut costs and keep prices low.

Still, she says relief is hard to come by. Many customers have begun supplementing their weekly grocery trip with stops at Dollar General.

“There’s a lot of discussion, especially among our senior shoppers, about how difficult it has become to keep up with prices,” she said. “Canned soups have gone up outrageously. Cereal is steadily increasing. Soda keeps going up. Every time one item gets a little cheaper, it seems like something else goes up.”