US consumers are now facing a national consumer price index that is at its highest level in 40 years, which has implications for household spending priorities.
In a way, that’s it.
According to a new survey by HomeServe, 82% of respondents said inflation is affecting their household budgets, with rising grocery, gas and utility prices having the biggest impact on wallets.
The most delayed purchases by respondents were furniture and household items (52%), holidays (47%) and a new or used car (37%).
But Americans are not giving up certain material comforts, inflation or not. According to the HomeServe report, spending habits they refuse to give up include eating out (49% tops the list) and streaming TV (47%). Vacations also made the list, with 45% of respondents saying they would not give up their vacations.
Currently, the top household consumer product Americans are willing to give up is regular pet grooming (16%), followed by club/golf/pool memberships (18%).
It’s also worth noting that the top household item consumers consider to be a priority is HVAC emergencies, which top Home Serve’s list.
“Overall, 28 percent of respondents indicated that this important home system needed to be repaired or replaced in the past 12 months,” the study said.
Since Home Serve specializes in home HVAC repairs, this number may be somewhat reserved.
Creature Comfort or Budget Killer?
In difficult economic times, one consumer’s material comforts can be another consumer’s budget killer. Who is right in that situation?
A financial expert backs the budget buster — at least when it comes to spending.
“Eating out, for example, is often a budget killer,” says Jay Zigmont, founder of Childfree Wealth in Water Valley, Mississippi. I’m not at all surprised that people don’t want to give it up. Eating out, ordering and delivery services offer comfort far beyond food. “
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For Sigismund and his wife, eating out is often the largest discretionary spending item in their household budget. “We can cook, we can cook, but it’s good to have someone else cook for you,” he said.
A big part of this mindset is that with the CPI at its highest level 40 years ago, there are generations of Americans who have never dealt with sharply rising consumer prices.
So a big challenge for many people right now is that they don’t have experience in a hyper-inflationary economy.
“We haven’t seen inflation like this in decades, so even those who have experienced hyperinflation may have vague memories,” Zigmont told TheStreet.com. “People who grew up during the Great Depression always had a fund to plan ahead. They knew the impact depression had on their finances.”
But for the past decade or more, Americans have been in an environment of low inflation and low interest rates.
“People need time to adjust to this new economy,” he said.
Traveling long distances?
One of the trends that economic experts see is that neither consumers nor companies are seeing the slowdown many expected after the Federal Reserve raised interest rates by a historic 75 basis points.
“Given the recent jobs data, it hasn’t impacted jobs in a macro sense yet,” said Charles Catania, head of the Chuck brand in New York. “Until we see the Fed’s actions impact the broader economy in a significant way, we’ll” Continue to see inflation teetering on the edge of household budgets. “
This gradual realization may change consumers’ “biological comfort” in the future.
“We’re actually seeing people eat out less in favor of more affordable brands,” Catania told TheStreet.com. “As families struggle to make ends meet, this brand-switching strategy is likely to become widespread. “
Even so, times are tough, and consumers aren’t ready to throw out the playbook.
“Americans are now focused on making small changes that can have a big impact on their budgets,” Catania noted. “This means there is a resurgence of value brands, which is in line with what we saw from the creature comfort survey results. The results coincide.”
“As inflation and the Fed’s response to it further impacts the broader economy, watch for changes in these numbers,” he added.