We’re spending money as fast as we can make it — and even faster, it seems.
The latest government release from the Bureau of Economic Analysis (BEA) on personal income and outlays showed that personal income increased 0.2%, or $45 billion in July. The BEA also estimated that spending — officially, personal consumption expenditures — increased by 0.8%, or roughly $145 billion.
July’s data gives a good snapshot of the state of the U.S. consumer, and several takeaways that hint at what we might expect through the next several months.
The overall pace of inflation was 0.2% in July, which matched the rate seen in June. Prices for goods decreased 0.3%, and prices for services increased 0.4%, indicating that consumers are still gravitating toward travel and other experiences during the summer months. Food prices increased 0.2%, which indicated that any respite at grocery store shelves is proving short-lived.
PYMNTS’ data showed that to grapple with the volatility inherent in putting meals on the table, buy now, pay later (BNPL) is fast emerging as an attractive payment option. A PYMNTS report on the “credit economy” found that 15% of millennials who pay via BNPL said their last such transaction was for groceries, and 14% of Generation X consumers said the same method had been used in their most recent transaction in the grocery store.
The BEA’s expanded tables showed that personal interest payments — non-mortgage in nature, so it includes credit cards and other debt — were up to $506 billion in July, or 1.8%, which nearly matches the growth in personal income.
As PYMNTS found, there’s a looming addition to the interest payments already being made. Student loan repayments may take several percentage points of discretionary income away from those saddled with education-related debt.
Personal saving as a percentage of income dipped to 3.5% in July, where that ratio had been in the mid-4 % range through the past several months. As a result, discretionary income has dipped a bit to under $15.7 trillion, down from a bit more than $15.7 trillion in June. As measured at the end of 2021, per BEA data, and flush with pandemic-era savings, disposable personal income was more than $16.1 trillion.
If income is growing more slowly than spending, if personal saving rates are pressured, it follows that credit cards are being used to bridge the gap and to keep consumers buying the goods and services they deem necessary. In the “Credit Card Use During Economic Turbulence” report, a PYMNTS and Elan Credit Card collaboration, data showed that 33% of credit card holders across all demographic categories increased the share of their expenses paid with credit cards in the past six months, while only 15% reduced it.
Consumers quickened their pace of spending in July. The 0.8% pace represented an uptick from the 0.6% gain seen monthly from May to June, and up from the 0.2% gain in May over April. But if the summer splurge was tied to travel, back-to-school spending and a willingness to tap what reserves may be still left on hand, the question remains whether the trends can continue, and for how long.
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