Jan 18, 2023 - Economy

Americans spend more than they make as high prices pinch

Data: Morning Consult; Chart: Axios Visuals
Data: Morning Consult; Chart: Axios Visuals

Overall consumer spending fell 4.3% in December from the previous month, according to a Morning Consult survey released Wednesday morning, with an increasing share of Americans spending more money than they're earning.

Why it matters: Inflation may be easing, but high prices are still a big problem for individuals, particularly after a year of spending down savings. It's not a great sign for economic growth.

Details: Shoppers are increasingly making tradeoffs. In order to afford rising food prices at home  up 12%, per the latest CPI — households cut back on restaurant spending by 8%, Morning Consult found.

  • Rising prices, particularly for food and shelter, are hitting the lowest-income earners the hardest. But more affluent Americans are feeling the pinch too.
  • 28% of those earning less than $50,000 said expenses outweighed their income in December — a big jump from 21% last year.
  • 9% of those earning more than $100,000 a year said the same, up from 7% last December.

Zoom out: The big story last year was that consumer spending held up, even as inflation soared, thanks partly to built-up savings. Now, consumers are running out of gas — and paychecks haven't kept up with inflation.

  • "That spending is finally coming down isn't too surprising, the more surprising thing was how well it held up in 2022," said Kayla Bruun, economic analyst at Morning Consult.

Yes, but: This is just one data point. The drop in December could be attributed in part to folks doing their holiday shopping a little earlier than usual.

What to watch: More data on retail sales at the end of 2022 will be out later this morning.

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