[ad_1]
It’s no secret that stubborn inflation and aggressive interest rate hikes by the Federal Reserve have weighed on Americans’ finances for more than a year now, but new data from the central bank shows how much consumers who feel the pain.
About 37% of Americans lack enough money to cover a $400 emergency expense, according to the Fed’s 2022 Economic Well-Being of US Households survey released Monday, up from 32% in 2021. That means nearly one in four consumers will have to use credit, turn to family, sell assets, or get a loan to cover any major debt. expected cost. And when asked about non-emergency expenses, 18% of Americans say the largest expense they can cover using only their savings is less than $100.
“The 2022 survey found that self-reported financial well-being was at one of the lowest levels observed since 2016,” central bank researchers wrote about the data, noting that “the higher prices negatively affect most households.”
While a record 35% of Americans say they are worse off financially than a year ago in the Fed’s latest household survey, there are also some bright spots due to the low unemployment rate. Despite persistent recession forecasts from Wall Street, US unemployment remained at a 54-year low of 3.4% in April. And the Fed found that one-third of US adults will receive at least one raise or promotion by 2022 amid a strong labor market.
The only problem is that the increases are not enough for most Americans to keep up with inflation. Between April 2022 and April 2023, real average hourly wages fell 0.5%, according to Bureau of Labor Statistics. And the Fed’s latest survey found that “more adults will experience an increase in spending than an increase in income” in 2022—44% of Americans will spend more, while only 33% will.
That mismatch of income and spending is affecting many consumers’ progress toward their retirement savings goals by 2022. Only 31% of non-retirees say their retirement savings plan is in track at the end of last year, a 9 percent reduction point from 2021, according to the data of the Fed.
The financial burden of high borrowing costs and rising prices also boosted spending this year. Claire Tassin, a retail and e-commerce analyst at decision intelligence company Morning Consult, said luck last week that while overall consumer spending remains stable through 2023, many are avoiding big-ticket discretionary purchases, which is evidence of “the continued impact of inflation.”
“In an April survey, 85% of Americans said they were concerned about the impact of inflation on their household finances,” he said, noting that it was about a 6 percentage point increase since in January. “That means shoppers continue to make hard sales and delay purchases to meet their financial obligations.”
Gregory Daco, chief economist of Hey Parthenon, warned in a Monday note that continued inflation and high interest rates will also cool the labor market and create a “cautious consumer.” Daco believes that the economy may fall on hard times because the “weaknesses” of American finances become more apparent in this environment (consumer spending accounts for 70% of US GDP). There is “trouble ahead,” he wrote. “We continue to expect a moderate recession.”
[ad_2]
Source link