Consumer Confidence Wanes for Paycheck-to-Paycheck Economy

Consumers are eyeing higher inflation on the horizon, as the latest data from the government shows, and a key demographic of the paycheck-to-paycheck economy is feeling less than sanguine about the future.

The latest survey on consumer confidence, as released by nonprofit business research organization The Conference Board, noted that the overall Index was 104.7, relatively unchanged from the 104.8 reading in February.

Lowered Expectations 

The Expectations Index — which the Board has said is based on consumers’ short-term outlook for income, business and labor market conditions  —fell to 73.8 from the February number of 76.3.

“An Expectations Index reading below 80 often signals a forthcoming recession,” the Board added.

Dana M. Peterson, the Board’s chief economist, said: “Consumers in the $50,000-$99,999 income group reported lower confidence in March.” 

The latest PYMNTS Intelligence report on the state of the paycheck-to-paycheck economy detailed that two-thirds of consumers within this income bracket live paycheck to paycheck. They expect to spend about 30% of their income on housing related expenses, higher than the 28.7% of the overall sample, with another roughly 20% to be allocated to groceries and household supplies. 

In looking at inflation for the year ahead, overall, consumers expect prices to increase by 5.3%, up from 5.2% in February. With a six-month horizon, 13.9% of consumers expect more jobs to be available, down from 14.1% in February. 

Muted Spending Expectations?

The Board also gave assessments of consumers’ spending outlook. In 16 separate categories — spanning from motor vehicles to pet care to travel — only a minority of respondents said they’d look to spend over the near term.

A significant percentage said they’d spend the same amount through the next six months. As many as 30% of consumers said that they anticipated spending less over the next six months on travel. Nearly 18% said the same for spending on beauty and personal care items and services. A full 26.2% said that’d spend less at restaurants. 

PYMNTS found that 66% of consumers earning from $50,000 to $100,000 say that they’ve cut down on non-essential expenses, due in part to retail price increases. Only 12% of these respondents think that their wages will match inflation, which means that most people are eyeing further erosion in the real-world purchasing power of their take-home pay.

Given the fact that inflation expectations remain elevated, that expectations for the future remain muted and that these individuals are already cutting down on expenses, merchants might gird for a rocky few months ahead.