Most Americans are paying higher electricity prices, and the pressure is unlikely to ease anytime soon. According to the Wall Street Journal, electricity prices have risen meaningfully across much of the country since 2022, and the drivers extend well beyond the frequently cited surge in data-center demand.While electricity prices had historically tracked inflation, that relationship broke down after Russia’s invasion of Ukraine sent natural gas prices sharply higher. Since then, utilities have faced rising fuel costs, storm damage from hurricanes and wildfires, and the need to replace aging grid infrastructure. State-level renewable energy mandates have also driven up costs in regions where wind and solar resources are less efficient, particularly in the Northeast and Mid-Atlantic.Looking ahead, the pressure is set to intensify. The Energy Department expects average residential electricity prices to rise another 4% in 2026, following a nearly 5% increase this year. Investor-owned utilities are projected to spend roughly $1.1 trillion between 2025 and 2029 on transmission, distribution, and generation. That’s double what they spent in the prior decade, and those costs are typically passed through to customers over time.For consumers, electricity is already the second-largest energy expense after gasoline. For investors, persistently rising power costs risk becoming a more durable source of inflation than policymakers anticipate. Even if headline inflation cools, higher utility bills could continue to pressure household budgets, complicate the Fed’s disinflation narrative, and weigh on consumer-driven growth.The Disconnect Behind Weak Consumer SentimentYesterday’s market commentary addressed the “consumption conundrum”. The phenomenon where GDP growth and consumer spending were larger than expected last quarter, while consumer sentiment remains at historically low levels. We examined the reasons underlying continued consumption despite the prevailing consumer sentiment. Today, we look from another perspective.Why is consumer sentiment so poor in the face of an economy that’s humming along? Many people are quick to point out the prevalence of political polarization and geopolitical tensions in today’s world. Those are valid drivers of sentiment, but we’ll look past them to focus on the trend in median household income and corporate profits since 2019.As shown below, real (inflation-adjusted) growth in corporate profits has far outpaced the growth of the median household income in the US since 2019. In fact, real corporate profits have increased by 43.4% (or 7.47% annually).Meanwhile, the real median household income has remained essentially flat over that period. In other words, the average American family is no better off despite solid economic growth and a tight labor market for many years. However, corporations are in a much better position than they were in 2019. If consumers are catching on to the trend depicted below, that surely could dampen sentiment.Tweet of the DayOriginal Post