'The Big Shrink': Americans are pulling back on spending as high prices persist
A growing number of Americans are pumping the brakes on spending as they continue to face elevated prices for everyday necessities like food, rent and auto insurance.
New findings published by Empower show that 62% of Americans feel their purchasing power and income in relation to prices is decreasing due to persistent inflation. Another 82% said their money does not go as far as it used to. Additionally, 79% of respondents noted that many household goods like cereal and chips are dwindling in terms of serving sizes.
With prices remaining uncomfortably high, more people have said they are hitting the limit on how much they are willing to spend, according to the "Big Shrink" study.
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About one-quarter of respondents – 27% – said they have hit a pricing limit, and aren't willing to pay anything more for grocery store staples – or else will cut the items from their shopping lists.
More than one-third of Americans are not willing to pay even $1 more for a cup of coffee, while 20% of Gen Z shoppers said they would stop buying fruits and vegetables if prices continue to rise.
Under President Biden, inflation skyrocketed to the highest level in 40 years. The cost of everyday necessities like rent, groceries and gasoline surged, prompting the Federal Reserve to hike interest rates to a two-decade high. Higher interest rates, in turn, created other downstream effects, pushing mortgage rates above 8% for the first time in decades and making it much harder for businesses to access credit.
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While inflation has fallen sharply from a peak of 9.1% and the Fed appears poised to cut interest rates this fall, many Americans have yet to feel relief.
Food prices are up 21% from the start of 2021, while shelter costs are up 21.6%, according to FOX Business calculations. Energy prices, meanwhile, are up 32%. Higher prices are particularly devastating for lower-income Americans because they tend to spend more of their already-stretched paycheck on necessities and have less flexibility to save money.
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Food has been one of the most acute inflation pain points for Americans. More than two-thirds of voters say that inflation has hit them the hardest through higher food prices, according to a survey published by Yahoo Finance/Ipsos in November 2023. That is more than 50 percentage points higher than any other category, including gasoline, transportation costs and housing expenses.
Rising food prices are concerning because those higher costs affect just about every household in the country. The burden is disproportionately borne by low-income Americans, who spend about 30% of their income on food, according to data published by the USDA.