The vaunted U.S. consumer isn’t happy right now.
Used to getting their own way on personal spending, Americans are now facing headwinds they haven’t felt in a while.
They don’t like it and businesses don’t like it, but with prices up by up to 20% in several key consumer spending categories, on a year-to-year basis, something has to give on the household spending front.
“The war in Ukraine and its impact on energy supplies are casting a shadow over the economic outlook, which has impacted multiple categories where energy is a central raw material,” said Jonathan Silver, chief executive officer at Affinity Solutions, a New York, N.Y.-based data services company that tracks consumer purchasing habits. “That, along with continuing supply chain issues, and a flight away from home ownership to rentals has pushed prices up across categories.”
Affinity Solutions' most recent data from May showed month-over-month spending down around 2%, marking the third straight monthly decline.
“That’s likely due to a lack of consumption as people continue to tighten their purse strings,” Silver said. “This pullback has impacted multiple categories, such as food services & drinking places (-2.7%), electronics and appliances (-16.4%), general merchandise (-2.2%), online sales (-8.1%), and sporting goods (-5.5%), among others.”
'Battening Down the Hatches' In Front of a Likely Recession
Clearly, U.S. consumers are cutting back in key areas and adding to savings, where they can, as the economic headwinds blow stronger.
According to a new survey by Personal Capital, a technology-based financial advisory firm, U.S. consumers are “feeling the squeeze “from roaring inflation, stock market volatility, and a looming recession. All of it is taking a toll on Americans.
“Over half (56%) of Americans say their standard of living is declining” the survey reported.
Personal Capital has pinpointed where Americans are planning on cutting spending, and it’s an eye-opener.
--- 41% of Americans say they will cut back on entertainment.
--- 40% will cut back on food (both restaurants and groceries.)
--- 40% say they will cut back on travel.
--- 34% will cut back on gasoline.
--- 34% will cut back on “convenience spending” (i.e., taking an Uber, ordering food and drink for delivery, and digital streaming services,)
--- 24% will cut back on personal care (think gym memberships and wellness care.)
Keep Your Eyes on the Prize
Financial experts say it’s understandable that consumers are slamming the brakes on personal expenditures. But take the long view, as well, they say.
“Take a critical look at your financial situation,” said Lacey Cobb, CFA, CFP® and director of advice solutions at Personal Capital. “Pay down consumer debt. Build emergency savings. Identify your discretionary spending.”
“And don’t lose sight of your long-term goals; keep contributing to your retirement accounts, especially if you get a 401k match from your employer.”
