Inflation-weary Americans are cutting back on spending, new survey shows

A new study has revealed that Americans across all age brackets reduced their spending between April and June—a bad omen for an economy that runs on consumption.

According to TransUnion’s latest consumer survey, 55% of respondents reported cutting back on discretionary spending in the second quarter. Nearly one-third (31%) also reported canceling subscriptions and memberships.

Discretionary spending is a broad category of non-essential expenses that includes dining out at restaurants, traveling, entertainment, and recreation. It’s an important indicator of consumer spending, which accounts for more than two-thirds of the U.S. economy.

According to the survey, Americans are spending less because inflation is making it harder to make ends meet. Half of the respondents in the TransUnion study said inflation was their top financial worry, and 84% rated it as one of the top three concerns.

Meanwhile, 48% of Americans reported that their household income hasn’t kept up with rising costs.

“Consumers are facing distinct challenges when taking into account today’s high inflation and interest rate environment,” said Charlie Wise, senior vice president at TransUnion. “From filling up a tank of gas to making a rental payment to buying groceries, most consumers are paying more today for everyday expenses than they ever have.”

Although inflation has moderated lately, it remains stubbornly high. The official inflation rate also doesn’t capture the years of cumulative inflation that has significantly reduced Americans’ purchasing power.

The impact of cumulative inflation

The government’s latest CPI report showed annual inflation easing to 3.3% in May, but that figure masks the effects of cumulative inflation since the pandemic.

According to data from the Bureau of Labor Statistics, consumer prices have risen a staggering 20.8% since February 2020. Some categories, like auto insurance and services, have reported even more significant increases.

By comparison, inflation rose 18.9% during the 2010s and 28.4% in the 2000s.

A new survey by Intuit Credit Karma found that 80% of Americans are feeling especially burdened by rising grocery prices. It’s no coincidence that prices at grocery stores have increased by 25% since the start of Covid.

Surging grocery bills came up at a recent Senate hearing, where Senator Elizabeth Warren said: “Grocery prices skyrocketed during the pandemic, and in many cases, they’ve kept going up, even though the pandemic is over.”

Although Warren blamed “corporate price gouging,” other senators said reckless government spending since the pandemic is the underlying cause of today's astronomical cost of living.

Regardless of who’s to blame, “Consumers continue to be very concerned with high prices,” said Joanne Hsu, director of the University of Michigan’s consumer surveys. “It’s continuing to impact the lives of a lot of people.”