Americans are still struggling to save money at the end of each month amid the increased cost of living, although not quite as much as they were a year ago, according to a new report by LendingClub and Pymnts.
The report is based on a survey of 4,163 U.S. consumers conducted from Jan. 6 to Jan. 27, as well as an analysis of other economic data.
It found that as of January, 60 percent of U.S. adults, including more than four in 10 high-income consumers, live paycheck to paycheck, although that’s down from 64 percent in January 2022.
According to the report, 45 percent of consumers annually earning more than $100,000 reported living paycheck to paycheck in January 2023, down from 48 percent at the same time last year.
Consumers ‘Making Behavior Changes’
The findings suggest that consumers may have better adjusted their spending, cutting back to manage their cash flows amid ongoing inflation, which has seen the costs of everything from groceries, rent, and travel surge.In addition, the report found that 42 percent of American consumers were living paycheck to paycheck without issues paying their monthly bills in January 2023, which is the same percentage reported in January last year.
Meanwhile, the share of those struggling to pay their bills dropped from 22 percent a year ago to 19 percent in January 2023, the report found.
More Interest-Rate Hikes Ahead
The Department of Commerce also reported that consumer spending rose more than expected in January, with spending up 1.8 percent, the largest increase since March 2021. Economists polled by Reuters had forecast consumer spending rebounding 1.3 percent.When adjusted for inflation, consumer spending increased 1.1 percent. Meanwhile, personal income adjusted for inflation increased 1.4 percent, and the personal saving rate was also up 4.7 percent from 4. 5 percent in December, the highest in a year.
That data suggest that inflation may persist for longer than anticipated, declining at a slower rate, which could prompt the Federal Reserve to further tighten its monetary policy as it strives to reach its inflation goal of 2 percent.
The central bank is widely expected to deliver two additional rate hikes of 25 basis points in March and May.
“We’ve got a little ways to go here, and I’ve argued that ‘Hey, let’s get to where we want to go,’ and then from there we can see how the data come in. Let’s hope that we get disinflation in 2023,” Bullard said.