Savings Won’t Be Enough to Prop up Retail Spend in Paycheck-to-Paycheck Economy

economy

The urge to splurge is receding.

High prices at the pump, and high prices no matter where you look, have translated into muted spending gains by U.S. consumers — and the savings they’ve accumulated may not be enough to prop things up.

As reported this week, retail spending was up only 30 basis points in February, per data from the U.S. Department of Commerce. Now, that’s still a gain, yes, but pales in comparison to the upwardly revised January data, which notched a 4.9% jump.

And here’s the kicker. If one strips out has and auto sales, then spending across all other, remaining categories, in the aggregate, show a 40 basis point drop (though here and there some retail categories showed gains, such as clothing and sporting goods).

Read also: Feb Retail Sales Stall as Consumers Pour Money Into Gas Tanks

We are in an environment where all manner of input costs are rising. Producer data this week from the Labor Department show wholesale inflation was up 80 basis points last month, and up double-digit percentage points year over year. The negative ripple effect is that — in at least some capacity — higher input costs get passed along in the form of higher retail prices.

At the same, over the last several months, the U.S. economy has been, bit by bit, becoming the paycheck-to-paycheck economy. As evidenced by recent PYMNTS research, 64% of the population fits within this demographic, defined as using up what earn to pay down what we owe — the bills that come due month after month as we live our daily lives.

No One is Immune From the Pressure

The data show that no one, really, is immune — not even the highest earners. The same reports find that among consumers who make more than $100,000 each year, nearly half live paycheck to paycheck, at about 48%. Nearly 12% have trouble paying their monthly bills.

Read more: Nearly Half of Consumers Earning $100,000 a Year Live Paycheck to Paycheck

Savings may, in times of relatively less economic stress, be a buffer of sorts — a conduit that allows us to keep spending, at least in the near term. But for those of us who live paycheck to paycheck and have difficulty paying bills, the signs are ominous:

For those making $100K but having difficulty meeting expense obligations, average savings stand at a bit more than $11,000, a far cry from the $22,000 for the same earnings cohort that does not face similar difficulty. For those who  make $50,000 or less, the savings for those same cohorts shrink to a respective $788 and $10,670. Those figures give you a sense of how quickly we might, as a nation of consumers, be forced to rein in spending … sooner rather than later.