53% of Consumers Say They Are Financially Worse Off Than Last Year

PYMNTS, August 5, 2022

Inflation runs rampant, at levels not seen in decades. Earnings reports continue to roll in, complete with cautious management commentary: Though consumers are still spending, taking reserves against anticipated loan losses seems the prudent thing to do.

And through it all, the Fed continues to raise rates, which means that the carrying costs of debt is more expensive.

In the Consumer Inflation Sentiment report, we find that the sentiment is, well, bleak. We surveyed more than 3,780 consumers to gauge their thoughts and feelings about their current and future financial positions.

At a high level, inflation and rising rates have been taking their toll. About 53% of respondents say their financial positions have worsened in the past year. More than 35% say their financial situations will worsen in the coming year. Of that tally, nearly half of those who say they live paycheck to paycheck with difficulties paying bills say their financial standings have worsened in the past year. That finding, we contend, points to a tough time meeting basic obligations in the months ahead.

No surprise, then, that 70% of consumers have been pulling back on their spending. And it’s also no surprise that, as evidenced in the chart below, more than half of consumers state that their household budgets “cannot take” further price increases. And nearly half of individuals/households have dipped into savings to cover household expenses.

The consumer has been the engine of growth for the U.S. economy for decades — but the road ahead looks a lot bumpier than it has in a long, long time.