Multiple surveys reveal that consumers are saving less, depending on debts to stay away from financial troubles, and starting to lose confidence in the economy due to the out-of-hand price inflation these days.
The Bureau of Economic Analysis data shows that in April, the household savings rate went down to 4.4 percent from the 6.2 percent in March. This is the lowest rate since the 2008-2009 Great Recession.
Also, the Federal Reserve's monthly credit report indicated that consumer credit raised by $38.07 billion in April, which is higher than the market estimate of $35 billion. The numbers dropped from the $47.34 billion increase in consumer credit in March.
The central bank noted that revolving credits, which include credit card debt, hiked by $17.77 billion. Non-revolving debts like auto and student loans increased by $20.3 billion. Consumer credits increased by a total of 10.1 percent year over year.
Revolving credits increased close to 20 percent in April to $1.103 trillion, topping the pre-pandemic record of $1.1 trillion. This has been driven by credit card balances rising to $841 billion in the first quarter of 2022.
Meanwhile, a recent survey by WalletHub, a personal finance website, revealed that about 33 million Americans think they will have more credit card debts by the end of the year.
"We project an increase of at least $100 billion in credit card debt during the year. This shouldn't be much of a surprise, considering the increased prices consumers are being confronted with and their increased appetite to spend," Jill Gonzalez, the website's analyst, said in a statement.
Another Fed research revealed that household wealth plummeted for the first time in two years in the first quarter. During the January-to-March period, households' net worth fell 0.4 percent to $149.3 trillion, driven by a $3 trillion collapse in equities.
Also, Brookings Institution warned that interest payments could start to be present in families' personal finances. In 2021, half of the total households with revolving credit card debts paid $111 billion in fees and interests.
Increasing debt and interest rates caused about one-third of Americans to expect their finances to mess up over the next year, the Fed Bank of New York's Survey of Consumer Expectations found. "More than half also believe that it will be harder to obtain credit next year," the survey added.
Consumer sentiment drops to an all-time low
The University of Michigan's Consumer Sentiment Index plunged deeper to a record-breaking 50.2 in June from 58.4 in May. Consumer expectations dropped to 46.8, while current conditions plummeted to 55.4. (Related: Consumer sentiment dropped further in May, survey reveals.)
"Consumer sentiment declined by 14 percent from May, spiraling a downward trend over the last year and reaching its lowest recorded value, comparable to the trough reached in the middle of the 1980 recession," said Surveys of Consumers Director Joanne Hsu.
More financial pressure may be felt by consumers as the consumer price index (CPI) skyrocketed than what the market expected in May.
"In May, the annual inflation rate went up to 8.6 percent, higher than the market forecast of 8.3 percent. This is the highest reading in 41 years," the Bureau of Labor Statistics reported.
Workers can't enjoy wage gains amid soaring inflation
Average hourly earnings raised 0.3 percent month-over-month in May to $31.95. But because of the soaring inflation, workers are struggling to enjoy their wage gains.
"The essential components of the CPI report are showing zero indicators that prices are slowing down," Christian Hoffman, portfolio manager and managing director at Thornburg Investment Management explained.
He said in the research note that the key drivers of inflation, such as food, energy and housing show no signs of subsiding, Even used vehicle prices, which had softened in recent months, came in with engines revving.
"With the expectations index weakening further, consumers also do not foresee the economy picking up steam in the months ahead," Lynn Franco, senior director of economic indicators of The Conference Board, mentioned in a statement.
In addition to this, 81 percent of adults think the economy is headed for a recession this year, a CNBC Plus Acorns Invest in You survey in April disclosed.
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Watch this video as experts break down the consumer price index.
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