REUTERS/Eduardo Munoz
- Millennials don't fear inflation like America's baby boomers do, according to a survey by Bankrate.
- Three-quarters of boomers said recent price growth hurt their finances, while just 55% of millennials did.
- Higher inflation eats into boomers' savings, while millennials have more time to recover, Bankrate said.
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Baby boomers are sounding the alarm on inflation, bracing for the fastest price growth since the 1980s and fearing for their life savings.
Millennials aren't as bothered, and most experts are on their side.
The Consumer Price Index – a popular measure of broad price growth – rose 0.5% in July, continuing a streak of decade-high inflation. And Americans are feeling that heat. Nearly nine in 10 adults in the US have experienced price hikes this year, and two-thirds said those hikes have hurt their finances, according to a survey conducted by Bankrate.com.
But for such widespread inflation, different generations are experiencing the price surge in starkly different ways.
Boomers are easily the most concerned about soaring prices. Ninety-five percent of them have run into higher prices, and three-quarters said the faster rate of price growth negatively impacted their financial situations. Both shares were only slightly lower for Gen Xers, Bankrate said.
Conversely, the country's youngest adults are far less frightened. While 84% of millennials said they ran into price hikes this year, and 75% of Gen Zers did, these higher prices only hurt 55% of millennials' finances and 54% of Gen Zers', according to the survey.
The generational gap makes some sense, Ted Rossman, senior industry analyst at Bankrate, said. Older Americans have already built up the bulk of their savings, meaning faster inflation poses a serious risk to their cash piles.
"Price increases are especially painful for retired boomers who are trying to make their savings last," Rossman said. "Younger, employed adults are in a better position to weather rising costs because their salaries should be rising as well."
Worrying about inflation can also keep the country from addressing a bevy of arguably more pressing economic issues. At a time when mass unemployment, income inequality, student debt, and affordable housing plague the US economy, inflation fearmongering can take the air out of much-needed work. Even the Federal Reserve is letting inflation run hot in pursuit of a more equitable recovery.
The ghosts of inflation past
Boomers are also painfully familiar with how strong inflation can decimate an economy. Rampant price growth tanked the US economy throughout the 1970s as prices surged faster than wages could keep up. Measures used to cool inflation brought new pain and sparked two recessions in the early 1980s. Living through that decade "could cast a long shadow" over the generation's views of inflation, Deutsche Bank economists said in March.
Younger Americans simply don't have that experience to shape their views. And the disparity shows in each groups' inflation expectations. Median price-growth forecasts from Americans less than 40 years old reached 4% in July, according to a survey conducted by the Federal Reserve Bank of New York. That median estimate rose to 4.5% for Americans aged between 40 and 59.
For those more than 59 years old, the median forecast hit 5.9% last month. That's the highest one-year expectation in data going back to 2013. Should that happen, it would be the fastest year-over-year price growth since 1982.
The latest data suggests older Americans' fears won't come true. The July CPI report was a big slowdown from June's print. Items powering the summer surge also cooled massively. Used-car prices rose just 0.2% in July after soaring at least 7.3% in each of the previous three months. Prices for airline tickets fell slightly, and prices at services rose at the slowest pace since February.
The Fed and the Biden administration both maintain stronger inflation will prove temporary, citing short-term surges in prices linked to reopening. Other experts see inflation reaching less worrying levels by early 2022 as the economy settles into a new normal.
Millennials, then, seem to be right not to worry. And fearful boomers should avoid their second nationwide inflation crisis.