The earnings drag now hammering retail stocks from Amazon to Target to Walmart is a sign that factors ranging from rampant price hikes to the obscured near-term outlook on personal and small business finances are pushing people into a more defensive economic posture.
“Recession” now features daily in headlines, and inflation is how consumers experience it. Amazon Founder Jeff Bezos made that point in a May 15 tweet, saying, “Inflation is a regressive tax that most hurts the least affluent.”
In fact, the administration tried hard to inject even more stimulus into an already over-heated, inflationary economy and only Manchin saved them from themselves. Inflation is a regressive tax that most hurts the least affluent. Misdirection doesn’t help the country. https://t.co/a8cygcunEG
— Jeff Bezos (@JeffBezos) May 15, 2022
In other words, it has an outsized impact on those least able to cope.
Data could make it appear otherwise, such as the April Retail Sales report released Tuesday (May 17) by the U.S. Department of Commerce, which showed overall consumer buying was up 0.9% last month, marking its fourth consecutive rise, albeit at a progressively slower growth rate since January.
However, independent soundings of consumer financial footing taken by PYMNTS in several studies paint a different portrait, especially for certain demographic groups.
When ‘P2P’ Means ‘Paycheck-to-Paycheck’
In the ongoing research series “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS and LendingClub collaboration, we find in the Generational Divide Edition that “the generational demographics of consumers currently living paycheck to paycheck indicates that millennials are the most likely to fall into the category, but the greatest increase in consumers living paycheck to paycheck is among baby boomers and seniors.”
According to data from the Generational Divide Edition, 54% of baby boomers and seniors were living paycheck to paycheck by December compared to 40% just eight months prior.
Savings are the cushion that softens the inflationary blow, but Generational Divide found that baby boomers and seniors who live paycheck to paycheck and struggle to pay their bills report having $1,236 and $1,277 in savings, respectively, well below millennials living paycheck to paycheck reporting problems meeting monthly bills, with an average of $3,731 in savings.
Get the study: The Paycheck-to-Paycheck Report – Generational Divide Edition
Back to Basics
The pullback in spending in recent months is also quantified in PYMNTS’ study “The ConnectedEconomy™ Monthly Report: 3 Ways Consumers Are Dealing With Inflation.”
This survey of nearly 2,800 consumers found that 61% of U.S. consumers are now “shopping mostly for basic essentials: gas, health products, food and beverages. These so-called ‘stick to the essentials’ consumers spend nearly three times as much on gas as they spend ordering from restaurants.”
Additionally, 42% of baby boomers and seniors who live paycheck to paycheck with issues paying said they would be unable to afford a $400 emergency expense.
Get the study: ConnectedEconomy™ Monthly Report
Even a “buy the basics” budgeting approach has limitations when prices are at a 40-year high and supply chain has yet to be restored to anywhere near normal capacity.
The New York Times reported May 11: “The price of food rose 0.9 percent in April from the previous month, the 17th consecutive monthly increase, according to the Consumer Price Index compiled by the Bureau of Labor Statistics and released on Wednesday,” adding that increases were especially high for dairy products, nonalcoholic beverages and eggs.
Despite overall higher prices plus delivery fees, online grocery shopping still saw an uptick in April as consumers sought deals on essential items and grappled with runaway fuel prices.
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