Over Half of Consumers Think Inflation Will Rise This Year

PYMNTS research has found consumer inflation fears are rising as fast as the price of goods.

This, as increasing shares of U.S. consumers across all income levels now spend most of their monthly income on expenses, finding it harder to put aside money for savings.

Per the latest edition of PYMNTS’ “New Reality Check: The Paycheck-to-Paycheck Report,” 51% of consumers earning more than $100,000 annually said they lived paycheck to paycheck in December 2022, up 9 percentage points from 42% in December 2021.

Consumers expect high inflation to continue eating away at their paychecks and purchasing power for at least the next two years and beyond, as macroeconomic headwinds continue to drive widespread pessimism and dampen consumers’ outlook around the ability to meet their financial goals.

According to research in “The New Reality Check,” 56% of consumers said they believe that inflation in 2023 will be worse than in 2022.

This share is even higher among consumers living paycheck to paycheck, with 70% expressing fears that inflation is set to rise even further over the next 12 months. Just one in every 10 of those consumers living paycheck to paycheck said they believe that inflation will be lower in 2023.

Millennials and bridge millennials are the most pessimistic about the inflation outlook for 2023, with as many as 58% to 59% of them believing that inflation will be worse this year. A majority of all generations hold the view that things are set to get worse in 2023.

It’s not all bad news, though, as four in 10 consumers across all financial lifestyles said they also expect their incomes to keep up with inflation this year, an increase from just one out of 10 consumers in 2022.

Not surprisingly, higher income consumers earning more than $100,000 annually are the most likely to think their own financial situations will improve at 36.5%.

Still, PYMNTS data found that many consumers are likely to refrain from making large purchases in 2023, particularly around discretionary items and experiences including electronics, home appliances and leisure travel.

Ninety percent of wage-earners reported that their pay increases were lost to inflation in 2022.