Inflation and recession jitters are cutting into the spending of households that aren’t living paycheck-to-paycheck, a sign of growing uncertainty among those with disposable income and good credit scores.
Even among households with comfortable incomes, rising prices are causing select spending reductions.
While spending in home remodeling, home furnishings, and appliances have held up under inflation as fewer people saw moving as an option, instead feathering the nests they currently inhabit, curious and potentially troubling drops may be signaling a change for 2023.
In New Reality Check: The Paycheck-To-Paycheck Report: 2022 Year In Review Edition, a PYMNTS and LendingClub collaboration and part of the long-running series tracking the state of U.S. household finances, we find consumers not living paycheck-to-paycheck are cutting back on big-ticket purchases for the home, which is a change from patterns seen in 2021 and 2022.
Our latest soundings confirm that the share of consumers living paycheck to paycheck has fluctuated over the past year, currently tracking close to the 64% we measured a year ago, but up 11-percentage-points from the low point seen in April 2021.
As our 2022 In Review Edition notes, consumers living paycheck to paycheck average fair to good credit scores. “Paycheck-to-paycheck consumers without issues paying their bills average a credit score of 689, while those struggling to pay bills each month average a score of 615. Still, 32% of paycheck-to-paycheck consumers with issues paying their bills have not paid for a credit product in the last three months, indicating that these consumers are more apt to be perceived as a liability.”
However, statistics that stand out in the roll-up report include the fact that households not living paycheck to paycheck and without issues meeting monthly expenses have reduced spending on the costly home nesting items and accessories that millions of homeowners spent on despite inflation.
Looking at the lagging mid-teen purchase rates in three categories — household furnishings, consumer electronics, and appliances — we see in the accompanying chart that all households — not just those living paycheck to paycheck and struggling — spent less in those three core areas over the past month.
We found that nearly 20% (19.2%) of households living paycheck to paycheck spent on home furnishings in the 30 days before the survey, as did over 18% of those living between checks but not struggling with bills.
Oddly, just 13.4% of consumers not living paycheck to paycheck spent on home furnishings in the same timeframe. Similarly, both groupings of paycheck-to-paycheck households spent on consumer electronics, while those without paycheck issues came in well below at 13%.
When it comes to necessities like appliances the gap closes considerably. However, both struggling and non-struggling paycheck-to-paycheck consumers still outspent households not living between checks in this category, if only by a slim margin.
The Difference a Few Months Makes
Contrast this with the September 2022 New Reality Check: The Paycheck-To-Paycheck Report: Inflation Edition where we saw consumers without paycheck-related issues making purchases in these same merchandise categories. For example, over 21% of financially stable consumers reported household furnishings, and nearly 17% buying electronics, the change is striking.
PYMNTS research finds that paycheck-to-paycheck living is the most common financial lifestyle in the U.S., but those not living paycheck-to-paycheck have been somewhat unscathed.
However, as the 2022 Year In Review report states, “Although consumers of all income brackets have been feeling the financial crunch, the share of high-income consumers living paycheck to paycheck has been particularly on the rise over the past two years. In November 2022, 47% of consumers earning more than $100,000 per year reported living paycheck to paycheck — a 13 percentage point increase from a low of 34% in July 2021.”
New Reality Check: The Paycheck-To-Paycheck Report: 2022 Year In Review Edition
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