Macy’s CFO Comments Underscore Risks to Paycheck-to-Paycheck Economy

Thus far, amid a pandemic, inflation, wars waged in Europe, and the risk of cyberthreats, the U.S. consumer has kept spending.

But the headwinds are mounting, and the convergence of all those events is translating into higher pieces at the register.

At some point, as that old standard goes, something’s gotta give.

In remarks reported by CNBC Wednesday (March 9), Macy’s Chief Financial Officer Adrian Mitchell said at an investment conference that higher oil prices are driving up prices elsewhere, including on the items that are most essential to daily life, such as groceries.

Inflationary pressures thus may have a greater impact on spending seen from low-income consumers. Mitchell said that Macy’s is re-examining its efforts to communicate value to those consumers (which would differ from the value that is communicated to luxury customers).

It all boils down to discretionary spending. And there may be little spending that, when all is said and done, is left to discretion.

See also: Retailers Face Brand New Competitor in Gas Prices

Living Paycheck to Paycheck

As PYMNTS found in its most recent Paycheck-to-Paycheck reports, 64% of consumers lived paycheck to paycheck in January, up from 61% in December.

Read more: Nearly Half of High-Income Earners Now Live Paycheck to Paycheck

The pressures were perhaps most heavily felt among consumers who make less than $50,000 annually. Seventy-seven percent of this cohort lived paycheck to paycheck.

And living within those bounds — where all the money goes to meet the basic expenses month to month — was no easy feat. Only 42% of consumers overall (regardless of income) who lived paycheck to paycheck reported that they do not struggle meeting those expenses. Drill down a bit, and more than 34% of consumers making less than $50,000 stated that they are living paycheck to paycheck, but with difficulty.

The fact that the lowest income bracket we have surveyed had only $788 in savings implies that there is very little cash cushion (if any) to absorb any exogenous shocks. The average savings rate for the population that do not have issues is roughly $4,370.

The pain points were not limited solely to low-income earners. PYMNTS data also found that as many as 48% of consumers who make more than $100,000 lived paycheck-to-paycheck too.

For many retailers — and certainly not limited to Macy’s — the squeeze to sales might come from consumer sacross all manner of demographics and economic strata. When it costs $70 to fill the tank and get to work (oil, after all, is at 13-year highs) or school, the belts tighten quickly. The consumer spends and spends, at least for now, but nothing goes on uninterrupted.