Despite a decrease in inflation rates, many US consumers continue to perceive that the cost of everyday essentials, including retail products, is on the rise, according to an exclusive report from PYMNTS Intelligence. This perception is particularly strong among consumers living paycheck to paycheck, especially those struggling to meet their monthly bills.
After peaking at 9.1 per cent in July 2022, inflation has gradually decreased, settling at 3 per cent in the first half of 2024. Apparel inflation rates have fallen to among the lowest. Despite this, 70 per cent of consumers believe their income has not kept pace with inflation, leading many to adjust their shopping behaviour by trading down to cheaper or lower-quality alternatives, as per the New Reality Check: The Paycheck-to-Paycheck Report.
Data shows that 63 per cent of consumers were living paycheck to paycheck as of July 2024, a slight increase from 62 per cent in July 2023. Notably, the share of consumers struggling to pay their monthly bills has risen by 2 percentage points since July 2023, reaching 23 per cent. This increase in financial strain has been accompanied by a drop in the share of paycheck-to-paycheck consumers who can pay their bills without issues, down from 44 per cent in May 2024 to 40 per cent in July 2024.
The perception of inflation among consumers is higher than the actual inflation rates, particularly among those with greater financial constraints. Most consumers report that the prices of basic necessities have increased over the past year, even in areas where inflation has declined. Those living paycheck to paycheck are the most likely to believe their income has not kept up with inflation, with 77 per cent of those struggling to pay their bills saying their income does not or only somewhat offsets inflation.
As a result of these financial pressures, nearly all paycheck-to-paycheck consumers who perceive rising costs have adjusted their spending habits. Many have turned to cheaper merchants or products, or have begun consuming less, particularly in categories like groceries and retail. In fact, 37 per cent of grocery shoppers have adopted a minimalist approach, opting to buy fewer treats, while 42 per cent of retail shoppers have become bargain hunters.
A smaller but growing group of consumers, especially those under financial strain, have adopted more conscious consumer behaviours, focusing on community-focused and sustainable approaches such as trade, barter, or reusing items. Among struggling paycheck-to-paycheck consumers, these conscious approaches are becoming increasingly common, with these consumers three times as likely to compromise on quality and nearly two times as likely to adopt a conscious consumer mindset compared to their financially secure counterparts.
Fibre2Fashion News Desk (DP)