With Inflation on the Rise, Paycheck-to-Paycheck Consumers See Loans as Financial Lifeline

Every tick upward in prices in 2021 has taken a bite out of consumers’ wallets and their confidence in the economy. The sticker shock many consumers feel appears to be underpinning the widespread pessimism about the economy.

The glum outlook is particularly acute for consumers living paycheck-to-paycheck, because this population is having the most difficulty recovering from the pandemic. PYMNTS’ data finds that almost one of five consumers has not yet recovered economically from the pandemic’s fallout, and this segment of the population may be the most likely to need interventions such as short-term credit to negotiate temporary financial obstacles.

These are among the key findings from Reality Check: The Paycheck-to-Paycheck Report, the Rising Inflation Threatens The Post-Pandemic Recovery edition, a PYMNTS and LendingClub collaboration. PYMNTS conducted a census-balanced survey of 2,366 consumers between Oct. 5 and Oct. 8, 2021 to analyze how consumers in the United States have navigated the troubled economic waters of the pandemic. We sought information about consumers’ economic conditions impact their views about inflation and how a consumer’s financial status affects spending and saving habits.

More key findings from the study include:

Forty percent of U.S. consumers have a negative outlook about the economy. The proportion of pessimistic consumers has been rising since May, while the share of optimistic consumers dropped to 34% in October, the most recent month for which data is available, from 44% in May. Even the most financially secure consumers have not escaped the gloom that is weighing upon most people’s minds. PYMNTS found that 37% of the individuals who do not need to live paycheck-to-paycheck are pessimistic, 34% are optimistic and 28% are neutral.

Eighty-one percent of consumers now say they are highly concerned about inflation, and consumers are bothered by rising costs regardless of their financial status. Our data reveal that 87% of consumers who do not have to struggle from one paycheck to the next say inflation is the economic issue that concerns them the most. This level of concern also is shared by 82% of people living paycheck-to-paycheck who do not struggle to pay their bills, and 73% of people who are having difficulty paying their bills while living paycheck-to-paycheck.

One-third of consumers say their personal financial situations worsened because of the pandemic. Less than half of this group — 14% of overall respondents — say their situations improved after the initial disruption.

The inflation spike that is weighing on consumers’ moods underscores the need consumers may hav e for easy credit. How consumers resolve their temporary financial obstacles will vary from one person to the next. Some may moonlight at a second job, negotiate new terms with some creditors, while may decide that a short-term loan will best help them navigate a financial setback. PYMNTS’ research shows that organizations that understand the financial challenges consumers are facing will be positioned to thrive in the post-pandemic economy.

To learn more about U.S. consumers and their views about the effect inflation is having on the economy and their financial well-being, download the report.