What you need to know

Inflationary pressures have only gotten worse, hitting a 40-year peak with the prices of necessities like gas and food sharply rising to levels unseen before. Interest rate hikes, lagging wage growth and a tumbling stock market have all led to consumer confidence plummeting to a 10-year low, as recession risks continue to mount. Despite elevated prices, it remains business as usual for some consumers heading into the summer. 43% are still planning to travel domestically in the coming three months, while only 23% expect to either cancel/change these plans. Those not as financially well off are seeking ways to stretch their dollars by slashing discretionary expenses and switching to lower-cost alternatives so they can navigate another income squeeze.

This Report looks at the following areas

  • Change in consumer finances within the past year

  • Sentiments toward consumers’ financial future

  • Change in consumer spending habits

  • How consumers plan to manage inflation

Market context

Consumer markets have faced an unprecedented level of turmoil in recent years. At the start of 2020, COVID-19 caused massive economic disruption, as various stay-at-home orders were introduced and nonessential businesses were closed. Consumer behavior shifted drastically, with much greater demand for at-home products and delivery services, straining an already challenged global supply chain.

Business operations resumed in most parts of the country in 2021 as vaccines were administered and social distancing restrictions and capacity limitations were relaxed. However, localized surges in case counts and the rapid spread of the Delta and then Omicron variants caused increased business as well as travel restrictions in and out of the US, exacerbating supply chain shortages in many industries.

Early 2022 saw a decline in COVID-19 cases in the US, while the conflict in Ukraine continued to escalate and more civilians were displaced. The economic fallout from the conflict and subsequent sanctions will include soaring energy prices, worsening supply chain disruptions, and potential shortages of food and other natural resources.

As of March, the Conference Board expects US Real GDP to increase at an annualized rate of 3% for 2022, down from previous estimates of 3.5%. To curb rapidly rising inflation, the central bank is tightening monetary policy and analysts are predicting anywhere from three to seven interest rate hikes this year to limit the supply of money in the economy.

US inflation reached 40-year highs in early 2022; barring a new, more severe COVID variant or expansion of the conflict outside of Ukraine, those figures should begin to stabilize and eventually fall as we enter the second half of the year. US consumers, however, should expect to see prices remain higher than they have been the past few years, as supply chain disruptions create product and labor shortages. As is often the case, wealthy Americans likely won’t see much change to their daily purchasing behaviors. Those consumers unable to withstand price increases will have to choose between cutting back and increasing debt.

Consumer data for this Report was fielded in May 2022.

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