Americans have found themselves spending the majority of their money on a narrow slice of items, as the economy continues to attempt a rebound from the pandemic.
The price of many items have risen exponentially due to a higher cost from labor expenses and supply chain hurdles.
Higher inflation rates have increased in various sectors, including rent, food, gasoline as well as furniture. Inflation rose to 7.9% in February.
Wages have not kept up with the higher rates of inflation in many jobs, leaving consumers with less disposable income to pay bills as some are racking up more debt.
“As household staples take up more space in monthly budgets and eat away at savings, consumers won’t be able to afford major purchases like houses or cars,” Morning Consult economic analyst Kayla Bruun wrote in a recent report on consumer spending.
“It may be difficult for them to justify discretionary expenses like restaurant meals and vacations,” she said.
Purchases Being Made Are SpecificConsumers are spending larger percentages of their salary on housing, food and gasoline, according to a survey of 2,200 people polled in February by Morning Consult.
Most consumers polled spent most of their income on rent or mortgages, food and energy bills as they are seeking several ways to cut back on costs as inflation rises.
Although the majority of the price increases in gasoline rose in March, by February, the cost per gallon has already risen by 18 cents on average.
Nearly one in three people said they drove less because of having to shell out more money, the survey said.
By the end of February, prices increased by 33 cents or 10.1% compared to the beginning of the year.
Through mid-March, gas prices jumped another 70 cents or 19.3% to $4.32.
Since the beginning of 2021, gas prices have steadily risen and are now $2 a gallon higher.
“Additionally, behavioral responses to inflation, like driving less to limit gas consumption, could have secondary effects on economic activity, potentially reducing trips to restaurants or retail establishments,” Bruun writes.
Workers who earned less than $50,000 annually spent over 15% of their total spending on groceries, compared with 12% for the highest-income earners.
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Grocery spending increased by 4.1% in February compared with the same month a year ago. During the past 12 months, prices for food consumed at home increased by 8.6% year over year according to the Consumer Price Index.
Only 12% of people in February said they put off purchasing groceries and food in February and said the main reason was due to a lack of availability in the inventory.
“Inflation had already presented itself as a growing threat to economic growth in the United States, and recent geopolitical developments are adding fuel to the fire,” Bruun said.
Some consumers have started to cut back by choosing different brands of food or buying items in bult, Leslie Tayne, a Melville, N.Y., attorney specializing in debt relief, told TheStreet.
“In today’s high-inflation environment, consumers still buy the staples they need to get through everyday life, such as food, clothing, and medication,” she said.
“However, they are taking steps to make the most out of every dollar by shopping sales, choosing generic or store brand versions of goods, and purchasing used items whenever possible and buying in bulk or shared buying,” Tayne said.
Higher Cost of RentingHousing accounted for 35% of total spending in February and increasing rental payments impacted lower income consumers the most.
Households that earned less than $50,000 annually reported the largest increase in monthly housing payment amounts in February compared with last year as average increases rose to 10%.
The middle-income reported a slight dip and the highest earner group reported flat housing cost growth, according to the report.
“Housing is one of multiple categories where inflation is disproportionately challenging lower earners: This group also tends to spend a relatively higher share of wallet on groceries and gas, categories with soaring price growth over the past year,” the report said.
Consumers have already slowed down their spending for eating out or monthly subscriptions, Tayne said.
“At the same time, many consumers are scaling back on or completely cutting out certain discretionary expenses to save money,” she said. “Top budget line items to get the ax include dining out, travel, and monthly subscriptions. Some consumers are also postponing major purchases, like cars and homes.”
Utility Bills RiseThe average monthly utilities costs increased by 9% over the past year, driven by higher prices.
Americans in all regions shelled out more money on utilities in February.
People living in the Northeast only paid modest increases as above-average temperatures in February lowered the amount of heating used.
Prices are not anticipated to decline as the war on Ukraine is ongoing.