In July 2022 we ran a survey aimed at uncovering the ways that Americans were responding to the most serious episode of inflation since the 1980s.
The findings were striking: 95.7% of respondents reported that they were concerned and making adjustments to their spending patterns. Surprisingly, even Americans earning over $150,000/year reported feeling the impact of rising prices.
Over the ensuing months, inflation has settled in and become an enduring reality. The impact of rising prices has been multiplied by rising interest rates, making loans and credit cards more expensive at a time when Americans are least able to bear extra costs.
We decided to follow up our July survey with an updated look at the impact Inflation is having on American consumers and how those consumers are responding.
These are the results.
- More than 88% of respondents across all income brackets stated that inflation has had a significant impact on their household budget. 48.93% said the impact was “high” or “very high”.
- 53.78%% have taken on additional debt, 27.89% reported putting more expenses on credit cards, and 23.18% reported delaying debt payments.
- Approximately 90% of respondents reported that inflation has had a negative impact on their mental health. Respondents reported feeling stressed, worried, and anxious.
- Paying bills was the largest source of stress, followed by interest rates, debt payments, and affording food.
- 82.5% of respondents reported that they were cutting back on holiday spending.
- Electronics, jewelry and watches, and dining out are all cited as targets for cuts, a negative sign for producers and retailers in these sectors.
The Impact on American Budgets
We asked three questions aimed at determining how Americans are responding to soaring prices,
Did You Do Any Of The Following in the Last Six Months?
Three responses were the most common. 30.41% of respondents worked more hours, 28.86% sold personal belongings to make money, and 28.02% canceled a trip or vacation.
Slightly smaller numbers reported delaying paying debt, delaying buying a car, taking a second job or side hustle, cutting back or eliminating investments, and skipping medical appointments.
Did You Have to Borrow Money or Take Out Credit to Cover Ongoing Expenses in the Past Six Months? If You Did, What Did You Use?
53.8% of respondents took on more debt to help them deal with rising prices. 27.89% reported putting more money on credit cards, with smaller numbers reporting borrowing from friends and family and using personal loans, cash advances, buy now pay later plans, and loans from retirement accounts.
Respondents from all income groups reported high reliance on credit cards, ranging from 26% to 30%.
With interest rates rising rapidly, reliance on credit in general and credit cards in particular only adds to the financial burden, another indication of unsustainable responses.
If You Had to Borrow Money to Cover Ongoing Expenses in the Past Six Months, How Much Did You Borrow In Total?
Responses here were heavily proportional to income. Lower-income respondents ($50,000 per year and below) were most likely to report borrowing $500 or less, middle-income respondents ($50,000 to $150,000) typically reported borrowing $500 to $1000, and those earning over $150,000 borrowed $2000 to $5000.
Here’s more on how Americans are coping with inflation.
Inflation and Mental Health
The connection between financial stress and mental health is well documented. We wanted to know how Americans perceive the impact of rising prices on their state of mind.
Over the Past Six Months, How Has the Rising Cost of Living Made You Feel?
Only 9.75% of respondents reported no psychological stress. 50% to 60% of all income brackets reported feeling stressed, worried, or anxious, 10% to 20% reported ander, and 10% to 12% reported depression.
“All of the above” was a popular option for those who selected “other”.
What Were the Specific Causes of These Feelings?
The financial stress that Americans are feeling derive from concern over the price of necessities. 40.67% were worried about paying bills, 30.86% were concerned about being able to afford food, and 29.76% were stressed over the cost of housing.
33.7% cited credit card debt, another indication that rising interest rates will bring continued pain.
Did You Make or Plan To Make Cuts In Your Spending on Any of the Following?
This question was designed to determine whether Americans are reducing spending designed to help them cope with psychological stress.
27.05% planned to cut gym memberships, 15.56 on mental health apps or subscriptions, and 14% were cutting back on therapy.
59.05% did not plan to cut back on any of the options, possibly because they weren’t using them in the first place.
Here’s more on how inflation is affecting mental health.
Inflation and Holiday Spending
The year-end holidays are an important source of relief for many Americans and an equally important source of revenue for many businesses. We wanted to know how inflation would affect holiday spending.
Do You Expect to Cut Back on Holiday Spending This Year?
82.5% of respondents reported that they will reduce holiday spending this year. This ratio held up with minimal variation across all income and age groups.
Where Will You Cut Spending?
The leading areas for spending cuts were gifts for family members (48.61%) and gifts for friends (44.35%). 40% reported that they will cut back on holiday travel, while food and alcohol were selected by 30% each.
What Gifts are Most Likely to be Cut?
Electronics were the leading category selected for spending cuts (42.8%), followed by jewelry and watches (41.45%), cosmetics and perfumes (30.28%), sports equipment (27.89%), and toys (27.89%).
The reduced spending is likely to have a significant impact on businesses that depend on holiday spending for a substantial part of their earnings.
Many of the findings of our inflation survey were expected and reflect predictable impacts of and responses to rising prices.
There were still some surprises. Notably, responses were extremely consistent across age and income groups. We expected that inflation would have a markedly lower impact on older and more affluent consumers. The survey results showed some minor variations but overall indicated that virtually everybody is affected by inflation.
Another takeaway was that continued inflation is likely to force more drastic measures. Many of the responses to inflation are not sustainable: there are only so many hours you can work and only so many items you can sell. Skipping debt payments and medical appointments can mushroom into higher costs down the line.
In addition, the heavy reliance on debt in general and credit card debt, in particular, is likely to generate magnified consequences down the line, as rising debt payments compete with household necessities for scarce financial resources.
We are not in a position to predict the future, but it’s safe to say that the impact of inflation is already high and is likely to increase exponentially if prices continue to rise, with potentially serious economic and political consequences.
About the Survey
The inflation survey collected responses from 1,549 individuals, geographically distributed across the US. 52.36% were female, and 47.64% were male.
38.34% earn less than $50,000 per year, 31.56 earn between $50,000 and $100,000 per year, 13.3% earn between $100,000 and $150,000, and 9.88% earn over $150,000. 6.91% of respondents preferred not to disclose their age.
20.92% of respondents were aged 18-29, 26.21% were 30-44, 28.21% were 45-60, and 28.21% were over 60.
All the data included in this study is available via the public domain. This means all statistics may be copied without permission. We do, however, appreciate citation as the source via a link.
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