US midterms: The cost of living is now a pivotal issue

In the United States, growth is holding up, unemployment remains low and consumer spending shows no sign of slowing. On paper, that should flatter the president’s party ahead of the midterms. Yet, Republicans could lose control of Congress. The rise in the cost of living, which weighs on households far more than macroeconomic aggregates suggest, could be one of the reasons. On top of persistent inflation, rekindled by the war in Iran, there is also a slowdown in wage growth and rising housing costs. The election could hinge on affordability, yet whichever party wins will lack the means to address it. A change in the majority in Congress will nonetheless have an impact on the country’s economy.

On 3 November, Americans will elect a new Congress for the next two years. With Republicans currently in control of the White House, the House of Representatives and the Senate, the balance of power in Washington could shift. Polls suggest that the House, at least, could swing to the Democrats. Beyond the new balance of power, the vote will reflect how voters view the way the country is being run. Here, we focus on the cost of living.

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