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Higher petrol prices, expensive housing, rising utility bills and the cost of everyday goods are putting pressure on household budgets
Nearly two years into Donald Trump’s second presidency, America’s economic performance presents a contradiction. GDP is growing, unemployment remains relatively low and stock markets are near record highs, yet consumer sentiment has slumped to near-historic lows. That disconnect is becoming important as voters head to the November 3 midterm elections.
Higher petrol prices, expensive housing, rising utility bills and the cost of everyday goods are putting pressure on household budgets.
The economy has become a major issue in the midterm elections, which will decide whether Trump’s Republican Party retains control of Congress. Although Trump is not on the ballot, voters are likely to judge his administration on its handling of inflation, jobs and affordability.
The US economy grew at an annualised rate of 3.4 per cent in the July-September quarter, its strongest performance this year. Unemployment stood at 4.2 per cent in September, while business investment, particularly in artificial intelligence, remained strong.
The stock market has also performed well during Trump’s second term, with the S&P 500 rising more than 26 per cent.
But these gains have not translated into a similar improvement in how many households view their finances.
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Why are Americans unhappy with the economy?
Consumer sentiment has weakened sharply since Trump began his second term in January 2025.
The University of Michigan’s consumer sentiment index has fallen to near-record lows. The survey measures how Americans view their personal finances, the wider economy and their ability to afford goods and services.
The weakness in consumer sentiment is striking because the US is not experiencing a recession. Employment remains relatively strong, businesses continue to invest and consumer spending has supported economic growth.
Strong economic indicators do not tell the complete story of household finances.
Higher-income Americans have benefited from rising stock prices and property values. Their spending has helped support the wider economy. But households that depend mainly on wages may not have the same financial cushion to deal with higher prices.
This has created a gap between the performance of financial markets and the experience of ordinary consumers.
Inflation is eating into household budgets
One of the biggest reasons for public frustration is that prices are rising faster than wages.
US inflation climbed to 3.7 per cent in September, while wages increased by around 3 per cent over the year. This means households are finding it harder to maintain their purchasing power.
When viewed over a longer period, since Trump took office in January 2025, consumer prices and average hourly earnings have both increased by around 5.5 per cent, according to US Bureau of Labor Statistics data.
In practical terms, workers have made little progress in improving their purchasing power since the start of Trump’s second term.
Even when inflation slows, consumers do not necessarily see their expenses fall. It simply means prices are increasing at a slower rate. The higher prices already built into household budgets remain.
This is one reason why inflation continues to be a major political issue even though it is below the levels seen during the post-pandemic surge.
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Iran war and tariffs push prices higher
Two developments have added to inflationary pressure. The war with Iran and Trump’s tariffs on imported goods.
The US-led war with Iran has pushed up global energy prices, increasing the cost of petrol and diesel for American consumers.
Regular petrol prices have climbed above $4 per gallon, compared with less than $3 before the conflict.
Diesel prices have risen above $6 per gallon. Diesel powers trucks, trains, agricultural machinery and other parts of the supply chain. Higher transportation costs can eventually make groceries and other everyday products more expensive.
Trump’s tariffs have also contributed to the cost of goods. Import duties increase the cost of products brought into the US and can make raw materials and components more expensive for domestic manufacturers.
A report by the Federal Reserve Bank of New York found that tariffs had added 2.9 percentage points to goods price inflation by February 2026. The researchers estimated that without the tariffs, goods prices would have declined slightly over the period examined.
This has created a difficult situation for the administration. While tariffs are intended to protect American industries and encourage domestic production, their costs can also be passed on to consumers.
For households already dealing with higher fuel and utility bills, even small increases in the price of everyday products can add to financial pressure.
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Housing costs create another challenge
Mortgage rates have climbed again after falling during the first year of Trump’s second term. The average rate on a 30-year fixed mortgage has moved above 7 per cent, according to Freddie Mac data, as reported by NBC News.
At the same time, home prices remain much higher than before the pandemic. The average price of a single-family home reached $422,700 in September, according to the National Association of Realtors.
Higher mortgage rates mean buyers must pay more each month to purchase a home. Combined with rising property prices, this has pushed home ownership further out of reach for many first-time buyers.
Existing homeowners have benefited from rising property values. US households held more than $35 trillion in real estate equity in the second quarter of 2026, according to Federal Reserve data.
But that wealth is tied up in property. It does not necessarily help families pay for groceries, fuel or other monthly expenses.
For younger Americans and first-time buyers, the combination of high prices and expensive borrowing remains a significant obstacle.
Why the economy matters in US midterm elections
The economic mood presents a challenge for Republicans as they seek to retain control of the House of Representatives and Senate.
The economy has been one of the most important issues in American politics, and Trump’s return to the White House was accompanied by promises to bring down prices and improve household finances.
But persistent inflation and rising living costs have made it difficult for the administration to convince voters that economic conditions are improving for everyone.
A Reuters/Ipsos poll published in October found that 78 per cent of Americans believed Trump’s policies were at least partly responsible for rising costs. This suggests that dissatisfaction with prices extends beyond the president’s political opponents.
The election will also test whether voters give greater weight to strong economic growth and employment figures or to their personal experience of rising expenses.
There are reasons for the administration to point to economic strength. Unemployment remains relatively low, businesses are investing and consumer spending continues to support growth. The Conference Board’s consumer confidence measure also improved in October, showing that not all surveys paint the same picture.
But the University of Michigan’s survey suggests that many households remain deeply concerned about their financial position.
Economic growth measures the overall performance of the country, while consumer sentiment reflects how people feel about their own financial circumstances.
If Republicans lose control of either chamber of Congress, Trump could face greater resistance to his legislative agenda during the final two years of his presidency. It could also make it harder for the administration to push through its economic and trade policies.
There are wider economic risks, too. Higher oil prices, tariffs and persistent inflation could keep borrowing costs elevated. Economists have also warned that a slowdown in artificial intelligence investment could weaken business spending and economic growth.
(With inputs from agencies.)
