September gave consumers lower prices on appliances, furniture and some food categories. It also gave them a 9.1% increase in gasoline prices.
The Consumer Price Index rose 0.6% in September on a seasonally adjusted basis and 3.7% from a year earlier. During the third quarter, prices rose 1.1%, the largest increase for the period in three years.
For about 53 million paycheck-to-paycheck consumers, the latest price increases are arriving after they have already exhausted what they believe they can remove from essential spending.
The September PYMNTS Intelligence report “The Five Financial Realities of Paycheck-to-Paycheck Living” estimates that two-thirds of U.S. adults, or about 180 million consumers, live paycheck to paycheck. Our data show that about 28 million were “knocked down with no room,” meaning an external shock such as a job loss or medical bill left them with nothing more to cut from essential spending. Another 25 million were “locked in by daily spending,” with everyday spending patterns leaving nothing further to cut.
About 40 million consumers believe they have room to reduce essential spending and have tried unsuccessfully to do so. About 45 million have room and report having successfully reduced those expenses.
The sharpest increases in the latest inflation data, released Wednesday (Oct. 14), occurred in categories that show up repeatedly in household budgets.
Energy prices rose 5.2% in September and 5.8% during the third quarter. Gasoline rose 9.1% for the month and 10.1% for the quarter. Energy prices stood 20.4% above their year-earlier level.
Shelter rose 0.4% in September and 3.2% over the past year. Rent of primary residence increased 0.2% for the month and 2.8% from a year earlier.
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Food and Retail Prices Present Consumers With Hard Choices
Food and beverage prices were unchanged in September and rose 2.5% over the past year. Food at home was up 1.8% annually. Several grocery categories became cheaper during the month. Prices for meats, poultry, fish and eggs fell 0.5%, while dairy products declined 0.9%. Fruits and vegetables rose 0.5% in September and 3.7% from a year earlier.
Restaurant prices continued to rise faster than grocery prices over the longer period. Food away from home increased 0.2% in September and 3.5% from a year earlier. There’s a widening difference in the price environment confronting consumers deciding how to allocate food spending, with annual grocery inflation running 1.7 percentage points below restaurant inflation.
Several retail categories also recorded price declines. Furniture and bedding fell 0.8% in September and were 2.4% cheaper than a year earlier. Appliance prices dropped 0.7% for the month and 1% annually. Personal care products declined 0.4% in September, although they remained 2.1% above their year-earlier level.
Apparel moved in the opposite direction, rising 0.3% in September and 3.4% over the past year. Sporting goods were 4.7% more expensive than a year earlier, while recreational reading materials rose 7%.
The differences among categories separate expenses households face regularly from purchases that are easier to defer. Gasoline, housing and food generally make more frequent claims on household income.
Our data showed that households with the least spending flexibility also reported having less money immediately available to absorb higher expenses. The median U.S. consumer holds slightly less than three weeks of typical spending in savings that could be accessed within a day. Consumers knocked down by a financial shock with no room to cut hold less than half a week, while consumers whose paycheck-to-paycheck status stems from chosen long-term commitments hold more than seven weeks.
Credit cards provide another source of financing, although the consumers with the least room in their budgets are also more likely to carry balances. Among cardholders overall, 13% report never paying their balance in full. The share reaches 34% among consumers knocked down with no room to cut and 20% among consumers locked in by daily spending. Among consumers with room to reduce expenses who are successfully doing so, the rate is 8%.
The September price data leave households heading into the final months of the year with different pressures, tied in part to how much flexibility they already have, but triage will continue to be part of daily financial life.
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