2023: the year of sticker shock

There's no question that Americans had their doubts about the economy in 2023. Despite economic metrics booming, a strong jobs market and strength on Wall Street, there is one aspect still sowing discord among the population: price tags. 

Sticker shock is keeping many down on the economy as "inflation continues to sour Americans," The Washington Post reported. And while President Joe Biden "has played a considerable role in improving Americans' financial situation through legislative victories," the Post reported, "basic expenses, such as food, housing and transportation, are considerably higher than they were a year ago, even as energy prices have declined." A few notable instances of sticker shock throughout 2023: 

Groceries

Totals at the grocery store are undoubtedly falling nationwide, albeit slowly. Price indexes collected by Consumer Affairs/Datasembly show that grocery prices increased 5.3% year-to-year in 2023, a dramatic fall from the 25.5% price hike in 2022. Despite this, a survey of 1,000 people by GoBankingRates found 34% of Americans cited food prices as their highest unexpected expense in 2023. 

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Inflation "has varied by as much as 5%" nationwide, according to WKMG-TV Orlando. This means that "where you live could make a $500 a year difference for a family of four that spends $750 a month on groceries." In Orlando, Florida, there was "an average increase of 6.5% in 12 months," which is "more than twice the increase felt by grocery shoppers in Richmond, Virginia, or San Diego." 

Grocery prices, perhaps above all, have contributed to sticker shock among Americans. And while prices are indeed coming down, many people remain uneasy over their food bills. Some experts said consumers will simply get used to high prices. "Right now, it's still a little bit of sticker shock," Steve Cahillane, CEO of snack brand Kellanova, told The Wall Street Journal. He added that the state of grocery shopping should improve in 2024 "as consumers' wages increase and companies roll out new products and offer more promotions."

Housing

It is becoming increasingly difficult to keep a roof over your head as the housing market plateaus, and a GoBankingRates survey found 12.24% of Americans cited housing prices as their biggest unexpected expense this year. By March 2023, data from Realtor.com showed the median house price in the country to be $424,495, though this was actually down from 2022. 

While there have been efforts to drop housing prices, they "have proven to be more resilient than expected in light of higher mortgage rates and affordability challenges," according to economic data from Fannie Mae. However, the company also expects "house price deceleration and predicts 2024 house price growth will slow to 2.8% on a Q4/Q4 basis." 

But there will still likely be sticker shock for Americans heading into the new year. "With ongoing affordability constraints and rising mortgage rates ... we expect the higher mortgage rate environment to continue to dampen housing activity and further complicate housing affordability into 2024," senior Fannie Mae economist Doug Duncan told Deseret News. 

Perception vs. reality

But was sticker shock real in 2023, or does it just feel that way to most Americans? While there is clear evidence that prices have shot up, "Americans feel inflation [and the] economy are much, much worse than they actually are," the Harvard Gazette reported. 

"Most traditional indicators suggest the U.S. economy is on track to a post-pandemic recovery," the Gazette reported. But there is a "distinction between the way economists think about things, which is the rate of inflation, and the way the public thinks about things, which is the level of prices," Harvard economic policy professor Jason Furman told the Gazette. "That's a little bit of the disconnect: The rate of inflation has come down quite a lot, but the price level has not come down." And while the government typically measures inflation year-to-year, people "may be comparing prices to a different benchmark — for example, what they remember prices being around the time the pandemic set in," added Harvard economic professor Karen Dynan. So while inflation may be slowing year-to-year, "people may be thinking about how much more expensive things are than they were three years ago."

"Inflation in the U.S. is falling relatively quickly compared to all of our other peer countries, and we have the strongest growth out of the recession," Felicia Wong, president of the progressive think tank Roosevelt Institute, told Vox. "But people don't just want falling inflation numbers, they actually want deflation."