How Americans are Adapting to Inflation and Rising Costs

Published Mar 17, 2022

Ron Ruffinott, Head of Research, Americas

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Between the continued presence of the COVID-19 pandemic and the ugliness arising from heightened political tensions across the globe, there’s been plenty of cause for concern in recent months. However, you may be surprised to know that neither of these issues top the list of what Americans are most concerned about right now.

In a recent Toluna survey of 1,056 consumers aged 18+ in the United States, two-thirds (64%) of respondents named inflation and rising prices among their chief concerns today. That’s significantly higher than their own personal health (50%), COVID-19 (46%), and political tensions around the world (48%), among much more.

The fact of the matter is that Americans are hearing about it from all angles. Just last week, U.S. Treasury Secretary, Janet Yellen, said that Americans will likely see another year of “very uncomfortably high inflation.”

How will these concerns manifest themselves when it comes to consumer behavior? Below, we take a look at consumers’ personal finances, how they’re adapting to inflation, and changes that we could see in the coming months.

The Current State of Personal Finances

It’s not all doom and gloom on the subject of personal finances. When we asked respondents how their finances compared to one year ago, responses were quite even in terms of those who claimed being better or worse off. However, when asked about their financial situation three months from now, nearly half of respondents (45%) said they expect to somewhat or much better off—as opposed to 19% expecting to be somewhat or much worse off. This optimism carries over to the subject of employment, too. With the strong market for applicants, only 14% of respondents are concerned about losing their job.

Amidst all of this positivity, though, is a cause for concern: 80% of respondents are either very or extremely concerned about inflation and rising prices. What are we to make of these contrasting consumer feelings? Ultimately, consumers are more concerned about how much their bills will cost—rather than their ability to pay them.

Adapting to Inflation

Though prices of goods and services are expected to rise alongside inflation in the coming months, many consumers have already begun adapting to the circumstances. When asked about the extent to which inflation and rising prices have impacted their spending behavior, only 5% of respondents said not at all. In contrast, 9 in 10 consumers say it has affected their spending behavior, anywhere from some extent to a large extent.

In general, consumers prioritize the important expenses in times of financial turmoil, and we’re already seeing this happen. What are some of the changes they’ve already made?

• 30% of respondents have put off upgrading their technology devices

• 26% have put off home repairs or renovations

• 26% have canceled or delayed vacations/travel plans

• 21% have stopped buying take-out coffee

• 14% have canceled home entertainment subscriptions

On top of rising prices of goods and services, there’s also been a great deal of fluctuation in the stock market. To understand how this has affected consumers, we asked them about changes they’ve made to their investing strategy over the past three months. Overall, the plurality of respondents (30%) haven’t made any changes to their investments, but others have reduced/pause investments (19%), invested more into the market (15%), changed their investment mix (16%), or sold for cash (14%). Expect these behaviors to continue—or even escalate—in the coming months.

Old Habits Made New Again

While we may not wish to relive the early days of the pandemic, there are a few old behaviors that seem likely to return in the coming months. At the beginning of the pandemic, we saw consumers hoarding toilet paper and cleaning products because of supply scarcity—and hoarding could return, albeit to a lesser extent, if inflation continues to rise over the next three months. In fact, 28% of consumers say they’ll stock up on items to get ahead of further price increases.

In the early days of the pandemic, with consumers largely staying at home, we also saw fewer cars on the road. This summer, we could see consumers driving less again—this time because of soaring gas prices. In fact, 28% of respondents have already reduced their driving over the past three months in response to rising costs, and an additional 31% say that they’ll drive less if prices rise further in the next three months.

Overall, consumers are feeling the impact of inflation and are changing their spending habits to financially safeguard themselves as much as possible. The evolving economic landscape will lead to continued changes in consumer habits and spending behaviors, making it even more important for brands to stay on top of consumer sentiment.

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