PYMNTS Intelligence: Consumers Fear Inflation Will Linger for 22 Months — or More

The Federal Reserve boosted interest rates again on Wednesday (Sept. 21) attempting to beat back rampant inflation — cold comfort to consumers bearing the brunt of exorbitant prices on daily essentials.

PYMNTS research into how Americans are coping with spiking prices even as more than 60% of U.S. households report living paycheck to paycheck, with many struggling to do so, makes for a very shaky two years ahead, at least by some estimates. Consumers are responding the only way they can — by cutting back and trading down.

For the study “Consumer Inflation Sentiment: Inflation Slowly Ebbs, But Consumer Outlook Remains Gloomy,” we surveyed 2,169 U.S. consumers across different financial lifestyles and demographic groups and found a consistent theme: Things will get worse before they get better, and they won’t be improving in the near term.

Read the report: Consumer Inflation Sentiment: Inflation Slowly Ebbs, But Consumer Outlook Remains Gloomy

Inflation Duration

PYMNTS data shows that consumers expect inflation to continue at current rates for 22 months or more. Households living paycheck to paycheck and struggling with monthly expenses are the least optimistic of those we surveyed, “with 28% saying they believe inflation will continue at its current rate for longer than two years.”

Burning Through Earnings

Despite fast-food chains and retail stores paying $15 to start and some even offering signing bonuses to attract scarce workers — unthinkable when the pandemic began — consumers say even considerable wage improvement is a day late and several dollars short.

Per the study, “Wage increases have failed to keep pace with inflation for 86% of consumers. Overall, 32% of consumers expect their financial standing to worsen in the next year, down ever-so-slightly from 35% in July.” Looking to consumers living paycheck to paycheck and struggling with bills, “79% say their financial situation is worse than it was a year ago, and 45% expect their financial situation to continue to deteriorate in the coming year.”

Room for Gloom

Study this chart and two lines stand out: Nearly 80% (78.3%) believe the economy will deteriorate “somewhat” into 2023, and close to 70% (68.9%) say they are already living paycheck to paycheck and having trouble maintaining lifestyles that way.

It underscores the pessimism among consumers generally, many of whom believe the economy is already in an undeclared recession. Per the study, 62% of U.S. consumers expect a recession in the next two years, and nearly half (48%) think it be official by 2023.

“Financially struggling consumers are the most likely to believe that the U.S. is already in a recession,” the study states, “including 34% of consumers living paycheck to paycheck with issues paying bills and 29% of consumers annually earning less than $50,000.”

Get it now: Consumer Inflation Sentiment: Inflation Slowly Ebbs, But Consumer Outlook Remains Gloomy