Inflation is a problem that worries Americans a lot. In recent years, the financial landscape for many Americans has dramatically shifted. According to new research from Empower, a leader in financial planning, investing, and advice, over 62% of individuals report a significant decline in their purchasing power, with 82% stating their money doesn’t stretch as far as it once did.
This ongoing economic squeeze has prompted over three-quarters of Americans to express their frustration, noting both the reduced sizes and increased prices of household staples.
Shrinking Wallets, Expanding Concerns
Household budgets are increasingly strained as essential items now consume more of Americans’ spending. About 78% report dedicating a larger portion of their budget to essentials compared to previous years, 27% of consumers have hit their spending limit and refuse to pay more for basic grocery items. Given that prices have surged by 20% since February 2020, the same goods that once cost $1,000 now require an outlay of $1,218 to match previous purchasing power.
Consumer Response to Inflation
About inflation, the phenomenon termed the ‘Big Shrink’ encapsulates the dual challenge of shrinking product sizes and rising costs. Rebecca Rickert, head of communications at Empower, explains, “Shoppers are endeavoring to stretch their dollars in a marketplace where they’re getting less for more.” This sentiment is echoed in consumer behaviors across various demographics:
- Coffee: 34% of consumers would balk at paying even an additional dollar for their daily brew.
- Bread: One in five Gen X shoppers will forgo bread if prices increase significantly.
- Fresh Produce: Similarly, one in five Gen Z consumers will eliminate fresh fruits and vegetables from their carts if prices rise by just a dollar.
- Snacks: 20% of Millennials are unwilling to pay even a dollar more for snacks like chips or chocolate bars.
Quality vs. Quantity
Consumers are noticing a dip in product quality as well. Almost half report changes in the quality of products they have purchased for years, with 79% seeing fewer chips in bags and 54% finding that chocolate not only costs more but also tastes worse. Such changes are driving a shift in brand loyalty, with approximately three-quarters of Americans turning to generic or store brands as prices climb.
As financial pressures mount, so too do the repercussions on Americans’ lifestyles and long-term aspirations. Nearly half feel priced out of achieving significant life goals, such as homeownership or retirement at their desired age. A sizable portion feels their amount of free time diminishing alongside their financial flexibility.
A Glimmer of Hope Amid Financial Gloom
Despite these challenges, a sliver of optimism persists. Twenty-eight percent believe that prices will decline before the year’s end, and 33% feel they can enhance their financial situation by reducing debt and making savvy investments. The hope for a more balanced economic future remains a key driver for many amidst these turbulent times.
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20 key data points from the study on financial pressures and consumer behavior:
- 62% of Americans report a decrease in purchasing power.
- 82% feel their money doesn’t go as far as it used to.
- 79% have observed household goods like cereal and chips diminishing in size.
- 87% of respondents express being “fed up” with rising prices.
- 78% are spending more of their budget on essential items.
- 27% have reached a pricing limit and won’t pay more for many grocery staples.
- Prices are 20% more expensive than in February 2020.
- 34% are not willing to pay even $1 more for a cup of coffee.
- 20% of Gen X will stop buying bread if the price increases by more than a dollar.
- 20% of Gen Z will drop fresh fruits and vegetables if the price rises by $1.
- 20% of Millennials refuse to pay $1 more for snack foods.
- 45% of people notice a decline in the quality of items they’ve bought for years.
- 54% report that chocolate tastes worse and is more expensive.
- 79% say there are fewer chips in the bags.
- 75% are turned off from a brand due to price increases.
- 77% are switching to generic or store brands as prices rise.
- 29% say their amount of free time is shrinking.
- 50% feel priced out of building generational wealth.
- 49% feel unable to retire at their desired age.
- 28% believe prices will drop before the end of the year.
