The U.S. economy is facing growing concerns as wages fail to keep up with high inflation, with consumers finding it increasingly challenging to maintain their purchasing power and financial stability.
A recent study conducted by PYMNTS Intelligence reveals that 85% of consumers feel that their wages have not kept pace with inflation, leading to widespread concern about the economy. This sentiment is reflected in consumers’ willingness to skip or make partial credit card payments and give up digital media subscriptions — attitudes that are likely to have ripple effects on holiday spending and beyond.
The “Consumer Inflation Sentiment” study, which surveyed more than 2,100 U.S. consumers to understand the long-term trends impacting economic concerns, also showed that only 2.9% of consumers do not express concern about the economy, with more than two-thirds of consumers believing the U.S. is either already in a recession or will enter one.
In fact, consumers whose wages have not kept pace with inflation are 21% more likely to believe the U.S. is currently in a recession compared to those with stronger wages. These consumers also expect it will take two or more years for inflation to return to pre-2021 levels. On average, consumers do not anticipate inflation returning to pre-2021 levels until spring 2025.
Overall, more than one-third of consumers report that the inflation rate has a very or extremely negative impact on their daily lives. Nearly two-thirds of consumers believe their financial goals depend on inflation returning to pre-2021 levels. This sentiment is particularly strong among consumers whose incomes are not keeping pace with inflation.
To make ends meet, a significant portion of consumers, 74% and 68%, respectively, have curtailed nonessential retail and grocery spending, according to PYMNTS’ latest report on consumer sentiment.
Unsurprisingly, deal chasing has also become mainstream amid higher prices, with nearly 50% of grocery and retail shoppers now prioritizing finding better deals when choosing where to shop for retail or grocery items. Middle-income retail shoppers are leading this trend and are the most likely to have shifted toward attaching higher significance to finding better bargains, at nearly 60%.
The rising prices have led loyal customers to become more conscious of supporting local businesses. Deal seekers, however, were less inclined to patronize local merchants. In fact, a third of loyal customers increased their purchases from local stores in response to higher prices, while only 21% of deal seekers did the same, per the research findings.
Overall, over half of bargain hunters state that their incomes have either remained stagnant or decreased in the past year. Additionally, they harbor a bleaker outlook regarding the prolonged duration of high inflation, anticipating it to endure until nearly the end of 2024.