Many Americans’ faith in the economy is being eroded as a result of the most severe inflation in decades. The fact that higher-income households had the most pessimistic outlook is particularly shocking.
When it comes to consumer sentiment, the University of Michigan Surveys of Consumers found that they fall in February was concentrated nearly completely among households with incomes of more than $100,000. According to the university, that group’s sentiment plummeted by roughly 13 percent, showing concerns from higher-income Americans about rising interest rates and the effect of inflation on their personal finances.
In February, consumer sentiment dipped to 62.8 points, down from a year earlier’s 76.8 points, according to the Conference Board.
All Americans are feeling the effects of rising U.S. prices, but lower-income families have less room in their budgets to deal with the rising cost of everything from gas to groceries. Even while upper-income households may be more aware of inflation since they have not had the same income growth as lower-income employees, this implies that their “real wages”—or wages after inflation is factored in—are decreasing.
Higher-income workers’ retirement funds and investments are also being affected by the stock market upheaval, which is causing them to worry. Retirement plans are available to 8 out of 10 high-wage earners but only 4 out of 10 low-wage earners.
TransUnion’s Charlie Wise, senior vice president of research and consulting, has been keeping an eye on consumer behavior during the epidemic and has found that “an optimistic customer is more comfortable buying and borrowing,” he says.
A gloomy consumer is more likely to back away from a purchase, he said.
Inflationary pressures are a concern.
According to TransUnion’s new Consumer Pulse research, issued on Wednesday, inflation is the most pressing economic issue for Americans right now. According to the findings of the study, middle- and upper-class customers are more concerned about the economy.
The poll indicated that 66% of consumers earning more than $100,000 were concerned about inflation, compared to 61% of those earning less than $50,000. Surveys conducted before Russia’s invasion of Ukraine did not include the probable inflationary impact of Russia’s attack on gas prices and other products.
“Lower-income customers have shown less anxiety, but the question is how much of it is due to inflation not comprehending,” Wise pointed out. Financial fluency is linked to a person’s degree of income.
Because of the increased demand for their services, low-wage workers are also seeing increases in their pay that are far greater than those seen by white-collar workers.
New government data shows that the average hourly wage for those in the leisure and hospitality industry, including waiters, hotel staffers, and the like, rose by 13 percent in January from the previous year. Inflation rose by 7.5% in the same time period, but their wages increased by more than that.
Bankers and real estate agents, for example, had their pay grow by 4.8% within the same time period. Inflation has reduced the purchasing power of these workers’ wages and salaries.
Ratings for President Biden
As a result, according to recent CBS polling, President Joe Biden’s popularity ratings on inflation and the economy have dropped. The study indicated that around six out of ten Americans believe the economy is in bad health.
Many economic indicators show that the country is on the road to recovery, with the jobless rate at 4% in January, which is close to the pre-pandemic level. Most analysts expect wages to rise by at least 3% this year.
That’s the main focus right now, according to TransUnion analyst Wise. “Not many people go out and buy groceries or gas these days. Statistically, it’s impossible to avoid it.”
Biden recognized in his State of the Union address on Tuesday that inflation is eroding the purchasing power of the middle class. In his speech, he vowed to fight rising costs, saying, “My main objective is to bring prices down.” For example, promoting competition among US suppliers of goods and enforcing penalties on corporations he claims are overcharging consumers were among the steps that the president laid forth.
Economists, on the other hand, predict inflation to continue strong through the first half of 2022 at the earliest.
Several potholes in the road”
Winnie Hewett, a 68-year-old retiree in Mission Viejo, California, is one of the many people affected by inflation. When she travels to visit her mother in North Carolina, she finds that the cost of renting a car has jumped from $800 to $1,200 a month.
With her youngest child in college, Hewett has shifted part of her spending, which has resulted in decreased daily shopping prices. Inflation, she said, is not the fault of Vice President Biden, but rather of supply-chain disruptions and the infusion of federal stimulus funds, which have bolstered household budgets and fueled demand.
Inflation would have occurred regardless of who was in charge, according to Hewett.
Some of her retirement investments have lost value as a result of Russia’s incursion into Ukraine, and she expects further market turmoil as a result.
Despite the bumps on the road ahead, Hewett is certain that inflation and other difficulties will improve over the year. “International and domestic ups and downs can be seen throughout time if you live long enough. We’ll get back on our feet, I’m sure of it.”