(CNBC) - Even with a lower-than-expected inflation reading Thursday, the cost of everyday goods and services remains much higher than it was at the start of the decade.
Prices rose 2.7% over the past year, according to the consumer price index, which tracks changes in the cost of everyday items such as groceries, shelter, clothing, health care and transportation.
While that marks a sharper-than-expected slowdown from October’s 3% pace and brings inflation closer to the Federal Reserve’s 2% target, it has remained above the Fed’s goal since March 2021.
The cumulative effect of those increases continues to strain household budgets, says Scott Anderson, chief U.S. economist at BMO Harris Bank.
“We’re all comparing our grocery bills to what our money could buy in 2019 and not walking away with a warm and fuzzy feeling,” Anderson tells CNBC Make It.
Overall prices are up about 25% since January 2020, based on CPI data — more than double the roughly 10% cumulative inflation seen in the five years before that.
Feeling the pinch
Wages have largely kept up with inflation since 2020 by most federal measures of income, according to a July 2025 report from Brookings. Still, not every worker has seen those gains, says Anderson.
“Wage gains tend to be higher for higher-skilled workers than lower-skilled workers, and in industries like financial services, information services and manufacturing sectors,” he says.
That uneven pattern may help explain why confidence remains weak, even with relatively low unemployment and steady overall wage growth.
Consumer sentiment — a closely watched measure of household confidence — is near historic lows, based on a monthly University of Michigan survey. The survey asks households how their finances compare with a year ago, whether they expect their finances to improve in the year ahead and whether now is a good time to make major purchases.
The latest index reading fell to 51 in November, a level last seen during the inflation surge of 2022, when the year-over-year inflation rate reached a peak of 9.1%.
Similarly, a recent Bankrate survey found that 32% of Americans expect their finances to worsen in 2026, the highest level of pessimism since the annual survey began in 2018. Inflation stood out as the top concern, cited by nearly two-thirds of respondents — far more often than income, debt or interest rates.
“The cost of living still feels like it’s rising for households who are now paying a lot more for food, electricity and housing than they were for several years before inflation shot up,” says Atsi Sheth, chief credit officer at Moody’s Ratings.
By Mike Winters
December 18, 2025
