Consumer prices in the United States rose 8.6% in May, a four-decade high.
Duffy also reduces spending on the groceries he buys every day, even on the smallest items. He shared: “Currently, I have to think and consider carefully whether I really need to buy this extra pack of chips. I’m more ‘sticky’ to my spending habits.”
Consumer prices in the United States rose 8.6% in May, a four-decade high. Many Americans, unable or unwilling to pay the higher prices, are starting to cut back on some shopping and outings.
Consumers’ near-term outlook for the US economy has hit its lowest level in nearly a decade, according to the Conference Board’s latest survey. Meanwhile, another survey of consumer sentiment also fell to a record low.
Rising prices are causing consumers to cut back on spending, which is the main driver of the US economy. The Commerce Department said U.S. household spending posted its slowest pace of growth this year in May.
Credit and debit card spending data from data firm Earnest Research shows that the decline in spending activity continues to occur. Specifically, the amount paid at retail stores decreased slightly in early June compared to May.
In that context, the trend of people’s spending cuts will put pressure on the US economic growth – which has shown signs of slowing down. Many forecasters are increasingly concerned that the world’s largest economy may fall into recession due to the impact of inflation and the Fed’s tightening of monetary policy by raising interest rates.
When Elizabeth Ray (46) noticed higher heating costs in the winter, she shared that things had peaked for her. Ray then realized that she needed to start rearranging her spending plans.
Clothing is one of the first items on the list of items to cut spending, Ray said. She plans to wear workout clothes – the kind of clothes she bought a lot during the pandemic. In addition, Ray also reduced the frequency of eating out, which is a big change from earlier times during the pandemic.
The Philadelphia resident shared: “I used to go for a walk alone a few times a week, buy food, order drinks and tip the waiter. But now, I have to ‘run away’ and save as much as possible. .”
In the latest “Beige Book,” more than half of the Fed’s 12 branches said consumers had cut spending ahead of current trends. A luxury car dealer on the eastern side of Mississippi said buyers are looking for smaller, more fuel-efficient vehicles because of rising gas prices. According to AAA, the average price of gasoline in the US rose to nearly $5 per gallon in early July, from about $3 a year earlier.
For 70-year-old Eileen Pollock, the skyrocketing gas prices have also meant fewer visits to the library, which is about 8km round-trip. She currently only visits the library once or twice a week. Such trips were part of Pollock’s daily routine, as she often fetched books for her grandchildren. She said: “I go there often and have never been afraid of the cost of moving.”
In addition, she also cut spending on entertainment activities in recent months. For example, she considered taking her granddaughter to the “Wizard of Oz” symphony event, but the ticket prices and parking fees were too expensive. So she decided to tell the story herself and sing to her granddaughter.
Meanwhile, spending on high-value items also became more dismal. A majority of Americans think now is the wrong time to buy a car or home, when a majority think current prices are too high, according to University of Michigan survey data. Consumers are cutting spending on non-essential goods like furniture and electronics, the Commerce Department said.
According to Earnest, consumers across all income groups have cut back on spending in recent times. The group of workers earning less than $100,000 a year tightened their belts at the fastest rate of any group from the end of May to the week ending June 15. Meanwhile, consumers also reduced spending on dining out compared to a year ago.
Avoiding dining in restaurants, but US consumers are still under pressure as prices of goods in supermarkets soar, food prices rose 11.9% in May from a year earlier, an increase the largest since 1979. Therefore, consumers also change their shopping habits. For example, customers at Whole Foods are choosing lower-priced fresh fish.
Joëlle Harris (48 years old) said she has stopped buying beef. She and her husband used to eat steak regularly, but now they choose other lower-priced meats, like pork tenderloin, to prepare a variety of dishes.
Meanwhile, Ray used to use scented candles and essential oil nebulizers in his office in the past. However, she has stopped buying this product for many months now. “I don’t see the light at the end of the inflation tunnel. It just seems darker,” Ray said.
Refer to WSJ