How Americans absorb price hikes linked to inflation | spending

A recent survey found that Americans are cutting back on eating out, driving, monthly subscriptions and buying branded products in response to higher prices. However, these lifestyle changes may not be enough to offset the exorbitant expense.

Inflation rates remain high, with the Consumer Price Index at an annual rate of 8.3% according to figures released in May. As prices rise, the personal savings rate in the US has fallen from 26.6% in March 2021 to 4.4% in April 2022 — a low rate, even compared to pre-pandemic levels.

There is no doubt that this bout of high inflation is affecting consumer spending and attitudes. In a 2022 survey on financial literacy conducted by Momentive in partnership with CNBC, more than half of survey respondents reported being under more financial stress than a year ago.

Consumers were the most stressed by gas prices, followed by rent or mortgage costs, food costs, and medical or health care costs.

“Our current level of inflation appears to be reducing the purchasing power of the American public and forcing them to reconsider the small trade-offs they make every day, such as whether you want to splurge on dinner out or make something at home,” said Laura Rwensky, director of research. In an instant, I wrote in an email. However, she says, “So far, inflation isn’t bad enough to prompt people to re-evaluate the big lifestyle questions.”

The survey findings also reinforce the ways in which inflation and price hikes have an uneven impact on consumers.

Forty-eight percent of adults surveyed said they think about price hikes “all the time,” for example, and a greater proportion of individuals — 55% — with household incomes of $50,000 or less think about price hikes all the time compared to income families. high.

Ramona Ortega, Founder and CEO of My Money My Future, in an email. “This flows through the family units.”

Young people and those in debt may also struggle to manage their money as the Federal Reserve raises interest rates and prices remain high.

“The last time inflation was the dominant economic issue in the United States was in the 1970s, before the birth of Generation Z and Millennials, so they don’t have any living experiences they can draw on to compare with today,” Wronski says. Unlike older generations, they are unlikely to Young people also have reliable savings.”

Looking ahead, most consumers expect deteriorating financial conditions. More than 80% say the US is likely to experience a recession in 2022, and more than 60% say they disagree with President Joe Biden’s handling of inflation.

If high prices persist, 52% of consumers said they would consider cutting back on eating out, 42% saying they would consider cutting back on driving and 40% saying they would consider canceling a trip or vacation.

Before making major lifestyle changes or deferring goals, identifying areas of greatest damage is the first step to crafting a response, says Joe Borman, senior financial planning advisor at eMoney Advisor.

“Like a doctor – it is important to diagnose before prescribing medication,” he wrote in an email. “Individuals should assess how their plan will be affected by inflation and other market conditions and then work with their advisor to put measures in place to support any deficiencies. For some, this may mean finding extra dollars to save or invest; for others, it may mean working for a year, two years, or Thinking of gradual retirement.