A recent survey report from First Insight, a predictive analytics firm, looked at how inflation and consumer attitudes showed that nearly all of those surveyed in April and July are concerned about the possibility of a recession, with 75% believing the economy is or may already be in a recession.
The high price most impacting consumers’ daily lives was gasoline in April at 66%, which rose to 68% of consumers by the end of July. Rising grocery prices impacted 58% of consumers in April, escalating to 66% by July, an increase of 13.7% annualized.
“While high gas and grocery prices continue to wield the greatest impact on consumers’ daily lives, the July data reveal that many other expenses have increased significantly in terms of their impact on consumers. The runaway prices have a majority of consumers planning to cut back on purchases as they say wages are not keeping up with the rising cost of living,” the report stated.
Nearly one out of three said rising costs for dining out were a top concern in April, but that increased to 37% by July. Higher prices on household goods were a top concern in April by 20% of the respondents, but that rose to 61% by the end of July. The survey also found that 33% reported increasing rents as a significant problem in July. Respondents cited everything from childcare to education and travel as being more expensive in July and problematic for consumers than in April.
The First Insight findings are consistent with the federal inflation and consumer confidence metrics recently reported by federal agencies. The U.S. Consumer Price Index indicated that inflation rose to 9.1% in June 2022, the highest since November 1981. The CPI was up 8.5% in July, and 80% of consumers said they have less confidence in spending because of rising prices, compared to 74% in April. Shoppers seeking less expensive ways to shop remained steady at 82% for April and July.
Eight of 10 surveyed in July felt the inflationary prices would remain elevated between one and two years, up from 60% in the April survey. According to the Conference Board, consumer confidence fell 2.7 points in July to 95.7. Consumers were also less optimistic about labor market conditions and the overall business climate outlook for the year.
“Concerns about inflation — rising gas and food prices, in particular — continued to weigh on consumers,” said Lynn Franco, senior director of Economic Indicators at The Conference Board. “As the Fed raises interest rates to rein in inflation, purchasing intentions for cars, homes, and major appliances all pulled back further in July. Looking ahead, inflation and additional rate hikes are likely to continue posing strong headwinds for consumer spending and economic growth over the next six months.”
First Insight reported that despite widespread layoffs and hiring freezes in the tech sector, fewer consumers in July said inflation is giving them concern for their income or employment situation. While 49% were concerned about their job in April, that number fell to 40% in July as the unemployment rate hit a low 3.5% nationally.
Walmart executives recently said they also see consumers feeling pinched by the inflationary prices for essentials. That is why the retailer said it is committed to more price rollbacks on opening price points for food and consumables and private brands.
First Insights found that 42% of shoppers are looking for deals and carefully shop within their budgets. One-third said they are buying less overall because of the rising prices. One in four are using more coupons for purchases, and 25% are shopping wholesale clubs more often and buying in bulk. Also, 26% reported buying more private brand items, and 33% are already shopping for the holidays as they fear prices will keep rising. Roughly 20% are also shopping in second-hand stores or discount outlets.
First Insights reported that consumers are cutting back on daily expenses, which may not have been such a burden before inflation. The behavior was also recently echoed by Walmart and Target execs, who each reported the sales of discretionary apparel and home had taken a backseat to food and other household essentials.
First Insight reports that 93% of respondents are cutting overall spending, with 54% dining out less in July than in April because of tighter budgets. While 39% said they were buying fewer groceries because of the rising prices, 36% were cutting back on entertainment, and 30% were trying to conserve gasoline and make fewer trips.
Food and consumables remained the top spending priority for 59% of consumers in July, and gasoline was the top spending priority for 44%. First Insight said that as the food CPI rose 12.2% in June, more families felt the sting on their budgets, prompting shoppers to reduce their spending on organic produce and non-alcoholic beverages.
Nearly one-third said high prices are causing them to save less, and 18% have had to tap into savings because of rising prices. First Insight noted that despite the absence of an official recession being declared, most consumers (62%) fear one is already underway or they have begun adjusting their consumption behaviors.
“Respondents reported shifts in their saving behavior as soaring prices continue to affect essential needs like food, clothing, and housing. One key area of the inflation data that aligns with recession fears is the concern around food. With groceries being one of the top categories impacting consumers when it comes to inflation, it’s no wonder recession fears elevate this worry as people report food prices and food shortages being a top concern related to recession threats,” the report stated.
Other significant economic concerns cited by the respondents include rising interest rates and higher housing costs which can also threaten family budgets and further hinder spending and erode savings, First Insights reported.
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