Not a Cost-of-Living Crisis Yet: 10 of 99 Countries Pass IMF Spike Test

Eighty-four percent of U.S. voters named the cost of living among their most important issues in an AP-NORC poll taken in mid-October, ten days before the Nov. 3 congressional election. The worry centers on ordinary bills. A September KFF poll found 52% of voters worried about affording food and 51% about utilities. That anxiety has pushed the press toward crisis language: Bloomberg files its coverage under "US Cost-of-Living Crisis," and CNBC writes of "the affordability crisis."

The data says otherwise. By a test built on the International Monetary Fund's definition, this year's price rises fall short of a cost-of-living crisis in most countries, the U.S. included. The test looks for a spike in essential prices — food, housing and transport rising in one quarter by more than twice the country's normal swing. Essentials spiked in only 10 of 99 selected countries this year. In 2022, the same test caught 62 countries, including the U.S., Britain and Germany.

How close is the U.S. to the threshold?

Very close. U.S. essentials rose 2.7% in the second quarter, the fourth-highest since 2005. The three higher quarters all landed in bad times: the 2008 recession and the worst inflation in four decades in 2021 and 2022.

Yet the country sits under financial pressure, not in crisis, because people still buy extras — clothes, furniture, leisure and meals out. The average American buys about 1.4% more of those extras this year after inflation. Restaurant spending per person runs higher than in any year since at least 2018. By the IMF's logic, a crisis begins only when people start buying less.

Why does it still feel like a crisis?

Higher prices slow how much more people can buy. Americans spend about 48% more per person than in 2019, but strip out inflation and the average person buys only about 16% more. This year, about 63 cents of each extra dollar goes to higher prices.

Other countries show the same mix of gloom and spending. The OECD's consumer confidence index sits below its long-term average in most of the 41 countries it tracks, yet in all but two — South Africa and Belgium — people still buy more extras. Chinese consumers feel gloomier than Americans but buy about 5% more extras. Germans, also gloomy, buy slightly more.

Are people buying less where U.S. prices spiked?

Not yet. Bureau of Labor Statistics data shows essential prices spiked in five U.S. metro areas: Detroit, Boston, New York, San Francisco and Philadelphia. Those five meet the first half of the IMF's definition.

Detroit spiked furthest, yet spending per person on extras there still rises 1.03%, against 1.45% in a typical calm metro. All five cities fall short of the crisis the IMF describes, in which costlier essentials leave households less to spend on everything else.

Where has a real crisis begun?

Not in the ten countries where essentials spiked. Spending on extras there grows about as fast as in calm countries. The spike fell mostly on transport costs, which carry fuel prices; without transport, eight of the ten — France and Thailand among them — would not have spiked.

Real crisis signs appear in 18 other countries, mostly in Africa and the Middle East, from South Africa to Kuwait and Qatar, where more people fall into the poorest spending group. In those 18, 13 million more people joined that group this year, and on average people buy less food and fewer extras than a year ago.

Iran and Iraq, the two adding the most people to that group, were hit by this year's Middle East war. Iraq's per-person spending on extras falls by about a tenth this year but is forecast to recover most of that loss in 2027. The 18 hold 5.8% of the world's people yet buy only 1.3% of its extras, so their cuts barely dent world spending.

What could still tip the U.S. into crisis?

World Data Lab expects more of the same in 2027: extras spending rising in the U.S. and the ten, and most of the 18 recovering. Three risks remain. The war has lifted oil 68% since February. Mortgage rates have climbed to 7.3%. And an AI share slump would hit the richest tenth of Americans, who own 88% of U.S. shares. Whoever wins on Nov. 3, support for households would work best if it followed how much people still buy — not only the prices they pay.