Inflation seems to be waning slightly, but a striking number of Americans say they’ve recently spent more than they’ve earned, driven in part by the high cost of basics like food and housing.
According to Morning Consult, “Household finances are starting 2023 on considerably weaker footing than was the case a year ago.” And even those households making more money have less insulation from high inflation.
Axios puts it this way: “The big story last year was that consumer spending held up, even as inflation soared, thanks partly to built-up savings. Now, consumers are running out of gas — and paychecks haven’t kept up with inflation.”
A recent survey shows that 28% of households making less than $50,000 a year said their expenses are greater than their income. That’s up from 21% last year. And it’s true, too, of households earning more than $100,000, though on a smaller scale — the share who said that rose from 7% to 9%, per Axios.
Morning Consult said that December showed slowing inflation for the sixth straight month, while consumer spending was down 4.3% in December.
“Heightened budgetary pressures brought on by persistently high inflation are forcing trade-offs for consumers, leading to reallocation across categories,” the report said.
It noted that “consumers across all income groups reported gradually weakening financial conditions.”
What’s costs more, less?
The latest Consumer Price Index from the U.S. Bureau of Labor Statistics, released this week and covering prices in December 2022, said that the drop in the price of gasoline “was by far the largest contributor to the monthly all-items decrease” in consumer costs, “more than offsetting increases” in the cost of shelter.
It said the cost of shelter, household furnishings and expenses, car insurance, recreation and clothing all went up in December, while the cost of used vehicles and air travel were among those that dropped.
Worldwide price crunch
The inflationary challenge is global, not national.
The World Economic Forum reported this week that global inflation “likely peaked in 2022,” but added that “those on low incomes and in the developing world will be grappling with high prices for years to come.”
The forum quoted Gita Gopinath, deputy managing director of the International Monetary Fund, who said that “even if inflation comes down, prices are high because we don’t have deflation, we have lower levels of inflation. The prices have gone up. How much of an impact that has had on households and on consumption varies across countries.”
The U.S. Bureau of Labor Statistics reported that the fiscal year ending in June 2022 showed the sharpest increase in consumer prices in over 40 years, at 9.1% inflation.
American Family Survey
The cost of raising a family was tied for first as a top concern from a curated 12-item list in the 2022 American Family Survey, selected by 41% of respondents. The nationally representative poll of 3,000 U.S. adults asked respondents to pick three items they believe challenge American families. Inflation tied with how other people discipline their kids.
The poll, conducted by YouGov for Deseret News and Brigham Young University’s Center for the Study of Elections and Democracy, found other top concerns include work demands, single-parent homes, crime, a decline of faith and the lack of quality family time in the digital age, among others.
The survey found more concern about economics among liberal Democrats than among conservative Republicans, who worried more about family structure, including discipline, single-parent homes, quality time together and changing definitions of marriage and family.