New Study Finds 70% of US Consumers Cutting Back on Nonessential Retail Purchases

With prices increasing at the fastest rate since 1981, Americans are feeling the pinch. PYMNTS’ data reveals that 86% of United States consumers believe they lost purchasing power in the last year, and more than half say their financial situation has worsened.

But perhaps the greatest danger to the economy is the wealth effect, a phenomenon in which consumers who have lost assets due to inflation are less likely to spend, creating a negative cycle. Our data found evidence that consumers who have broken the paycheck-to-paycheck cycle are already pulling back spending, especially retail spending, which may have long-lasting effects.

For “Consumer Inflation Sentiment: July 2022 — Consumers Pull Back and Prepare for the Long Haul,” PYMNTS surveyed 3,783 individuals to understand how consumers across financial lifestyles and demographics are experiencing the current economic situation. The report details which behaviors consumers are changing to insulate themselves from the long road ahead and reveals how long consumers anticipate that road to be.

Key findings from the report include:

• Just 37% of consumers say they have no worries about how to afford food and the basics for their family; 49% are dipping into savings to cover everyday expenses.

Our data also shows that although just 31% cut back on healthcare expenses due to inflation, 62% are stretched to the limit and believe their household budget cannot take further price increases.

• Four in five affluent consumers are cutting back their spending, and retail purchases are taking the biggest hit.

Consumers are facing difficult choices around spending, and PYMNTS’ data finds that many are taking interventions such as buying fewer goods, shopping at less expensive stores, dining at home more often or staying at home rather than taking a trip.

• Consumers believe that high inflation levels will persist for nearly two more years.

Our research into consumer perceptions of how long the COVID-19 pandemic would impact the economy proved fairly prescient, as consumers accurately forecasted a span of years when experts were still predicting in weeks and months, indicating tough times ahead for American consumers and businesses as consumers shift their spending habits to make do with less.

To learn more about how inflation is impacting consumer sentiment, download the report.