With almost 60% of U.S. people living on a paycheck to paycheck basis, it is not a shock to witness that the cutbacks on spending have started due to continuously increasing inflation. Even though there is a strong job market, wage increases, and savings due to the Covid stimulus, pricing increases in essential spending categories such as gas, food, and shelter are causing more Americans to be warry of their pocketbooks closely.
Americans have reduced buying, and they will keep buying less if inflation persists. The financial pressures are not just limited to lower-income consumers. A recent survey shows that higher-income Americans have also started cutting back on their spending on travel, dining out, cars, and vacations.
The high-income consumers represent just one-third of consumers, but they are responsible for almost three-quarters of the spending. Mark Zandi, Chief Economist at Moody’s, says, “If the high-income consumers are out buying, we won’t see a big impact on raw consumer activity.”
Lower-income households are experiencing more financial anxiety and are under more stress than higher-income households due to rising inflation.
Laura Wronski, Senior Manager of Research Science at Momentive, said, “Inflation is a problem that compounds over time, and even high-income individuals won’t be insulated from the second-and third-order effects of price increases.”