Latest / Stagflation Conversations with Fexingo: High Inflation, Slow Growth, and 1970s Echoes / Why Staying Home Is Getting More Expensive
Transcript
- Lucas: You know, Luna, I saw that CNBC headline this morning — 'Funflation hits home: Why staying in isn't the cost-saver it used to be.' And it really stuck with me. Luna: Funflation — I've seen that term floating around. The idea that even your Netflix night or cooking at home is getting noticeably more expensive. Lucas: Exactly. And it's not just a clever word. The Bureau of Labor Statistics put out June CPI yesterday — consumer prices up 3.5 percent year-over-year, a little softer than expected thanks to energy easing. But core CPI, which strips out food and energy, is still sticky at 336.1. Luna: So the stuff that actually matters for a stay-at-home lifestyle — streaming subscriptions, groceries, hobby supplies — those aren't getting the energy break. Lucas: Right. And the data backs that up. Look at the sub-indexes: recreation services, which includes things like streaming and cable, rose 4.8 percent year-over-year. Food at home? Up 4.2 percent. Meanwhile, average hourly earnings are up about 3.5 percent — so real purchasing power for stay-at-home activities is actually shrinking. Luna: That's the stagflation pinch in a nutshell. You're getting paid a bit more, but everything you'd normally do to save money by staying in is costing more. So what's the net effect on how people actually spend? Lucas: It creates what economists call a substitution trap. In a normal recession, you'd trade down — skip the restaurant, cook at home, and your budget improves. But when grocery inflation outpaces restaurant inflation — which it has for about eighteen months — that trade doesn't save you money anymore. Luna: I remember in 2023, people were talking about the 'egg index' and how baking at home cost more than buying a cake. That feels quaint compared to now. Lucas: Yeah, and the composition has widened. It's not just eggs. Streaming services have raised prices pretty aggressively over the last two years — Netflix, Disney+, Hulu — all up anywhere from 15 to 25 percent. Your home internet bill? Up about 8 percent year-over-year. Even the cost of a board game or a jigsaw puzzle has risen with paper and plastic prices. Luna: So the classic 'cocooning' trend — where people retreat into their homes during economic uncertainty — is actually becoming a luxury behavior rather than a frugal one. Lucas: That's the insight. And it's reshaping entire sectors. Take the home renovation market — we've done episodes on that. People were pouring money into their homes during the pandemic, and even now, with higher interest rates, they're still spending on upgrades because going out is expensive. But the materials themselves — lumber, copper, paint — those cost more. So you're paying a premium for the privilege of staying in. Luna: And the data shows that overall consumer spending is holding up, but the mix is shifting. Real GDP growth was only 2.1 percent annualized in Q1 — that's slow but positive. So people are still spending, they're just getting less for it. Lucas: That's the stagflation pattern. The economy isn't shrinking — the unemployment rate is 4.2 percent, job openings actually ticked up to 7.6 million in May. But growth is tepid, and inflation is persistent. So households feel like they're treading water. Luna: One thing that stands out to me is the 'subscription fatigue' angle. People used to think $10 for Netflix was a steal. Now Netflix's standard plan is $15.49, and that's without the extra member fee. Plus you probably have Spotify, Amazon Prime, maybe a gym app — all with smaller but regular increases. Lucas: Exactly. And these are the kind of price increases that fly under the radar. They're not like a gas price spike that hits you in the face. They're incremental, auto-renewed, and they compound. The Bureau of Labor Statistics' recreation services index has been rising steadily for two and a half years. Luna: So what do people do? Cancel? Downgrade? Or just absorb it and cut elsewhere? Lucas: We're seeing all three, actually. Churn rates for streaming services have gone up — people rotate in and out rather than keeping all of them. But there's also a trend toward ad-supported tiers, which are cheaper but come with commercial interruptions. That's basically trading time for money. Luna: And for the economy as a whole, what does this mean? If staying in isn't a cost-saver, does that push people back out into the spending economy — restaurants, travel, experiences? Lucas: Surprisingly, some of the data suggests that. Restaurant spending has been resilient. But that's partly because people view dining out as a treat they're unwilling to give up, even as it gets pricier. There's a psychological anchoring effect — people remember what a restaurant meal used to cost, but they still go, just less often. Luna: So the old binary — going out is expensive, staying in is cheap — has broken down. Now both options are expensive, but in different ways. Lucas: Exactly. And that's why 'funflation' is a useful lens. It captures the idea that the cost of leisure — whether at home or out — is rising faster than overall inflation. And for households that are already squeezed, that puts real pressure on discretionary spending. Luna: I want to go back to the grocery piece for a second. Food at home inflation at 4.2 percent — that's higher than headline CPI. And a lot of that is driven by processed foods and beverages, not just fresh produce. Lucas: Right. The CPI detail shows that cereals and bakery products are up 5.1 percent, nonalcoholic beverages up 4.8 percent. These are staples. So someone trying to meal-prep to save money might find their grocery cart costs 20 percent more than two years ago, even if they're buying the same items. Luna: And that hits lower-income households hardest, because they spend a larger share of their budget on food. So funflation isn't just a middle-class annoyance — it's a regressive phenomenon. Lucas: It absolutely is. And it ties into the broader stagflation narrative. When growth is slow and prices are sticky, the people with the least flexibility absorb the most pain. That's a consistent pattern from the 1970s echo. Luna: Speaking of which — you've traced a lot of these curves with your fountain pen in the research room. What's the one historical parallel that jumps out at you right now? Lucas: The 1973-75 period. Then, as now, you had an energy price spike — oil embargo then, supply constraints now — combined with a consumer who was caught off guard by how quickly their purchasing power eroded. And the response was not to stop spending, but to trade down within categories. That's exactly what we're seeing: smaller baskets, fewer subscriptions, more ad-supported tiers. Luna: And yet the Fed is trying to manage it without pushing the economy into recession. The ten-year breakeven inflation rate is at 2.25 percent — that's below the current CPI print, so markets expect inflation to moderate. But the path is uncertain. Lucas: If walking through the economy with us has made something click — maybe you look at your own streaming bills differently after this conversation — that's the value we're trying to provide. And honestly, if today was worth a coffee to you, there's a link for that: buy me a coffee dot com slash fexingo. Luna: Yeah, that kind of listener support is what keeps the show ad-free and independent. So if you found this useful, it's appreciated. Lucas: Now, back to funflation. One area I haven't seen much coverage on is the cost of hobbies. The at-home economy includes things like gardening, DIY, baking — all of which have seen input cost increases. Luna: Oh, absolutely. I read that the cost of seeds and soil has gone up about 10 percent year-over-year. And home improvement tools — power drills, saw blades — those are tied to metal and plastic prices, which have been elevated. Lucas: And the labor component if you hire someone — even for small projects — has risen with wage pressures. So the DIY alternative to hiring a contractor is also getting more expensive. It's a squeeze from all sides. Luna: Is there any category of staying in that is actually getting cheaper? Or is this a universal trend? Lucas: I'd say reading — physical books — has remained relatively stable. Book prices have risen but not as sharply. And digital content like podcasts — free, obviously. But that's a small slice of the pie. Luna: So the takeaway for our listeners: if you thought staying home was the budget-friendly option, you might want to check your recurring charges. The math has changed. Lucas: And that math — the slow erosion of your homebound dollar — is exactly what stagflation looks like in practice. It's not a 1970s gas line. It's a $16 Netflix charge and a $5 box of cereal. Luna: Well said. I think we'll be watching how consumer behavior adapts over the next quarter. If real wage growth stays modest and inflation stays sticky, we might see a bigger shift toward truly free leisure — parks, libraries, community events. Lucas: And that's a whole other episode. For now, keep an eye on those subscription renewals.