Inflation Forces Americans to Cut Back on Spending

Inflation Forces Americans to Cut Back on Spending

Over three-quarters of Americans are concerned that higher prices will make them rethink their financial choices in the coming months.

Amid the current red-hot inflationary environment—which has surged to nearly 8 percent year-over-year—many Americans are being forced to reconsider how they spend their hard-earned money.

According to a late March survey from CNBC, 48 percent of respondents think about rising prices “all the time.” In addition, 76 percent are concerned that higher prices will make them rethink their financial choices in the coming months.

“Amid high prices, Americans are cutting back: most (53 percent) say higher prices have caused them to cut back on dining out in the last six months, while 39 percent say they’ve cut back on driving, canceled a monthly subscription (35 percent) or switched from a brand-name product to a generic one (32 percent),” the poll wrote.

The survey also found that if prices remain high, over 50 percent of Americans will consider reducing their spending on meals, while 42 percent plan to spend less on gas.

Americans Forced to Spend More

According to Bloomberg economists, current inflationary pressures will end up costing the typical American household an extra $5,200 this year. Broken down, that comes out to a rather eye-opening $433 in extra monthly costs.

“Accelerated depletion of savings will increase the urgency for those staying on the sidelines to join the labor force, and the resulting increase in labor supply will likely dampen wage growth,” the economists claimed.

Moreover, separate findings from Moody's Analytics claimed that spiraling inflation is costing the typical U.S. household an additional $296 per month. Even more alarming is the fact that the research firm stated that “it’s going to get worse before it gets better.”

Will Inflation Ever Slow?

According to Moody’s chief economist, Mark Zandi, inflation was largely driven by the two-year-long coronavirus pandemic, which scrambled supply chains and the labor market.

“If that diagnosis is correct, as the pandemic fades and as we get the other side of the fallout of the Russian invasion, inflation should moderate,” he told CNBC.

But he did note that consumers need to brace for more inflation pain in the coming weeks. “We’ve got a couple of bad months dead ahead,” he claimed.

Per Fox Business, Zandi also noted that the increasingly hawkish Federal Reserve needs to “normalize interest rates” and “make them more consistent with where we are in the business cycle with the strong economy and lower employment and higher inflation.”

Otherwise, there will be a higher chance of a recession over the next year, he concluded.

Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.