Consumer Sentiment on Personal Finances Dips Due to Inflation

In 2024, a few key concerns bubble consistently to the top of the list for the paycheck-to-paycheck economy.

The PYMNTS Intelligence report “New Reality Check: The Paycheck-to-Paycheck Report: Why One-Third of High Earners Live Paycheck to Paycheck” found that 82% of the roughly 4,000 respondents said concerns about inflation are No. 1 on the list of economic woes, and only 17% hold out any hope that inflation will subside anytime soon.

A spate of data points this week underscored that inflation is still a key concern — although the inflationary pace may be moderating — and pressures are enough so that consumers are feeling a bit less sanguine about their personal finances.

In the June Surveys of Consumers announced by the University of Michigan, long-term inflation expectations are inching up.

“Assessments of personal finances dipped, due to modestly rising concerns over high prices as well as weakening incomes,” Surveys of Consumers Director Joanne Hsu said in a statement.

The assessment of current expectations slipped to a 62.5 reading, down from 69.6 in May and 68.9 a year ago.

Looking at the Long Term

Long-run inflation expectations inched up from 3% last month to 3.1% in June — not much of a bump. However, Hsu noted that the inflation expectations “remain elevated relative to the 2.2% to 2.6% range seen in the two years pre-pandemic.”

The overall index measuring sentiment dropped to 65.6 in the preliminary June estimation from a final reading of 69.1 in May, falling for the third consecutive month.

The dip comes after May data from the U.S. Bureau of Labor Statistics showed the simple cost of having a home — renting or buying — has been on a steady upward march.

The index tied to shelter was up 0.4% in May, and that 0.4% monthly increase has been logged through the past four months. There were puts and takes on what is needed to keep everyone fed. Food consumed at home (and thus bought at grocery stores and other merchants) was flat in terms of May pricing after declining by 0.2% in April.

But going out to eat continues to be a bit weightier on the purse, as prices rose by 0.4% in May, the highest monthly acceleration since January.

Wage growth is not keeping pace with inflation, and nearly half of consumers grappling with inflation revolve credit card balances, so it may be little wonder that sentiment has been falling to multi-month lows.

It may be the case that consumers are still spending on experiences, but at the same time, PYMNTS Intelligence data found that consumers deplete 67% of all available savings, on average, every four years. Among paycheck-to-paycheck consumers, the average recurrence drops to once every 2.5 years.