Nearly all Americans cut spending amid inflation: CNBC survey

0
151

[ad_1]

A woman looks for products in a department store on January 26, 2023 in New York City. US gross domestic product increased at an annual rate of 2.9% in the fourth quarter of 2022.

Leonardo Munoz | Corbis News | Getty Images

Nearly all Americans are cutting back on their spending in some way, according to a new CNBC and Morning Consult survey.

The survey found 92% of Americans are pulling back, further evidence of what retailers like Walmart, Target, Home Depot and Best Buy called out as cautious consumer spending shifts during the first quarter.

Shoppers continue to report inflation squeezing their finances, with concerns particularly heightened among middle-income Americans. Of the survey respondents, 92% of middle-income Americans — or those who make between $50,000 and $100,000 a year — reported being “somewhat” or “very” worried about higher prices.

That’s a higher proportion than those in low- and high-income groups, with 88% of each of those segments reporting feeling concerned about higher prices. One somewhat bright spot: That share of high-income households, represented by those earning $100,000 or more a year, represents an improvement from a year ago when 92% expressed concern around inflation, according to the survey.

Over the last six months, higher prices have led nearly 80% of consumers to cut spending on nonessential goods, like entertainment, home decor, clothing, appliances and more, the survey found.

Further, two-thirds of respondents reported spending less on essential items, like groceries, utilities and gas. In the grocery category, more than half of consumers said they’re buying cheaper alternatives, like private label brands, or just generally buying less.

“Customers continue to seek value given the impact of inflation,” Walmart CEO Doug McMillon said on the retailer’s first-quarter earnings call. “Private-brand penetration is up about 110 basis points versus last year for Walmart U.S.” A basis point is one-hundredth of a percentage point.

Spending at value-oriented grocery stores in May outpaced spending in the overall grocery segment, according to Bank of America aggregated credit and debit card spending data.

“We think this reflects trade down from higher incomes, in line with commentary from Grocery Outlet and Walmart,” Bank of America Securities analyst Robert Ohmes said.

What’s more, consumers don’t expect to change spending habits for the remainder of the year.

Two-thirds of respondents to the CNBC and Morning Consult survey said they still plan on cutting spending on essential items over the next six months, and 77% plan to slash spending on non-discretionary goods, a percentage only slightly below those who said they have already cut back in that area.

The CNBC and Morning Consult survey was conducted online earlier this month and polled more than 4,400 adults.

Categories seeing pullbacks

Among the hardest-hit categories by inflation-fueled spending cuts, clothing came in as the No. 1 nonessential category where consumers have cut back, with 63% reporting buying less since the beginning of 2023.

Walmart and Target, the nation’s largest multi-category retailers, each reported seeing weakness in apparel spending in the first quarter.

A woman looks for products in a department store on January 26, 2023 in New York City. US gross domestic product increased at an annual rate of 2.9% in the fourth quarter of 2022.

Leonardo Munoz | Corbis News | Getty Images

While experience-based spending — particularly travel — has held up better than goods purchasing this year, the survey found spending at bars and restaurants was the second most likely nonessential category to see cuts, with 62% reporting spending less.

Monthly aggregate restaurant spending slowed in May from April, according to Bank of America’s credit and debit card data. The “fast casual” segment continued its spending slowdown, “casual dining” saw fewer dollars than the month before, and pizza in particular continued to see year-over-year declines.

Spending on entertainment outside of the home, including concerts, has fared slightly better, with 58% of consumers reporting they’ve cut back there, according to the CNBC-Morning Consult survey.

Meanwhile, more than half of Americans say they’ve cut back on major household-related spending like renovations or appliances.

“We are seeing more of a ‘break, fix, replace’ than upgrade [in appliances] and a little sensitivity to these single, larger-priced discretionary items,” Home Depot CEO Ted Decker told CNBC ahead of its investor day Tuesday.

And nearly half of survey respondents said they’re spending less on electronics like computers and phones. That pullback was even more stark among lower-income Americans, with two-thirds of the group cutting back in the category.

Best Buy CEO Corie Barry said following the company’s first-quarter earnings report that customers are making trade-offs.

“Not every industry is seeing the exact same customer behavior because the customer is in control and making trade-off decisions based on how that inflation is affecting them personally,” Barry said.

[ad_2]

Source link