Food and Housing Costs Keep Consumers in Cutback Mode

Consumers are getting some inflation relief, at least in terms of the slowdown in price increases. They’re just not necessarily getting it on the bills that determine how much money is left at the end of the month.

As the Bureau of Labor Statistics reported on Wednesday (Aug. 12), July prices fell for gasoline, several grocery categories and medical care commodities.

But shelter remained 3.2% more expensive than a year earlier, food at home was up 2.7%, and eating out cost 3.4% more.

The fact that essential expenditures still are creeping higher in terms of costs seems set to burden households a bit more. PYMNTS Intelligence found that 53% of consumers were struggling with daily living expenses as of April, a share that had barely moved across three surveys since October. More than one-third of U.S. adults (34%) had reduced both spending and savings, putting them in the report’s “reactive” consumer group.

The volatility of food and housing inflation helps explain why.

Food prices overall rose only 0.1% in July, and consumers received some outright price relief. Meats, poultry, fish and eggs declined 0.7%, while dairy and fruits and vegetables each fell 0.1%.

For households already under pressure, groceries leave relatively little room to maneuver. The PYMNTS Intelligence report noted that 91% of reactive consumers struggling with daily expenses identified groceries as a challenge. The percentages were high across every generation: 88% for millennials, 90% for Generation Z, 93% for Generation X and 94% for baby boomers and seniors.

PYMNTS data shows housing pressure can also come from the cost of maintaining a household. Among reactive Gen X consumers, 52% reported housing challenges, more than twice the 25% among balanced Gen X consumers. Among those facing housing difficulties, utilities were cited by 81% of reactive consumers versus 57% of balanced consumers.

There are places where inflation is giving households more breathing room. Energy prices dropped 3.5% in July, including a 2.9% decline in gasoline. Medical care commodities fell 0.6% for the month and 2.7% from a year earlier.

But the consumer response suggests those savings have not been enough to reverse the broader retrenchment.

The share of consumers dealing with cost-of-living challenges by cutting everyday expenses increased to 66% in April from 62% in October. Fifty-one percent were avoiding large purchases. At the same time, the share increasing savings declined to 25% from 27%.

For some consumers, the squeeze reaches beyond spending into debt payments. Among reactive millennials facing debt and credit challenges, 75% identified credit card payments as their biggest problem, compared with 60% of balanced millennials. Overall, 42% of reactive millennials reported debt and credit challenges, versus 28% of balanced millennials.
Consumers are nevertheless resisting across-the-board austerity. Our data show that 73% of reactive consumers with daily living pressure continued to protect entertainment spending, 71% protected pet care and 59% protected dining out and delivery. Clothing and personal care proved easier to sacrifice.

Falling gasoline or medical goods prices can free up cash, but food and housing repeatedly draw from the same paycheck. Consumers then decide which other purchases survive.

July’s inflation report shows a slowing pace of price increases reaching parts of the household budget, but the trend has yet to translate into an end to the cutback economy.