Consumers slightly reeled in their spending last month as they continue to grapple with high levels of inflation, the Bureau of Economic Analysis (BEA) reported Thursday. It’s yet another sign that Americans are worried about the overall state of the economy as predictions of a pending recession grow.
The most recent Forbes Advisor-Ipsos Consumer Confidence Biweekly Survey found that consumers’ spending woes continue to deepen: Nearly 7 in 10 respondents said they’re less confident making purchases at all price points than they were six months ago.
The survey, conducted by Ipsos, measures consumer sentiment over time.
Though consumer spending softened last month, it doesn’t mean consumers have stopped spending money. Twenty-six percent of Americans are withdrawing money more than usual, an increase of six points since early June. And more than one-fifth of respondents said they’re spending money more than usual.
Rather than enjoying an influx of cash to spend, people are paying more to complete their typical purchases and may be reeling back their discretionary spending as a result. Prices remain higher than usual across spending categories and gas prices recently topped an average of $5 per gallon.
Meanwhile, 42% of respondents said they’re saving less money than usual, indicating they’re struggling to keep up with high prices.
Jobs Optimism Continues to Hold
Though confidence in the jobs market remains strong—the highest out of any of the indices Ipsos tracks—it’s apparent that many salaries just can’t keep up with inflation.
The consumer price index (a primary indicator of inflation) is 8.6% higher than last June, and if consumers are spending more on the basics, they’re less likely to have money leftover to save for a rainy day. And that rainy day could be coming faster than many anticipated: 70% of economists polled by the Financial Times said they expect a recession to occur by the end of 2023.
And there’s some doubt that the economy will eventually even out in a way that looks familiar.
“The economy is being driven by very different forces” than in the previous 25 years, Federal Reserve Chair Jerome Powell said at an event this week. “What we don’t know is whether we’ll be going back to something that looks like, or a little bit like, what we had before.”
Rather than experiencing typical cycles, the new economy must contend with an evolving pandemic, ongoing supply chain issues, and the continued war in Ukraine.
Overall Confidence Sinks To Pandemic Low Points
Overall confidence in the economy read 46.9 this week (out of 100), its lowest point since July 2020.
Ipsos data note a decline is driven by two groups as the country responds to the overturning of Roe v. Wade by the Supreme Court: Respondents identifying as Democrats, and people aged 18 to 34. Overall confidence for Democrats dropped nearly 4 points, while for young adults, a nearly 7-point drop dragged down the overall score.
In a separate Ipsos poll, half of Democrats described themselves as “extremely angry” at the Supreme Court decision to overturn the landmark health care case.
Another demographic that saw a drop was households earning $50,000 or less. That group’s sentiment reached its lowest point since September 2020.
Those with lower incomes may be feeling the stress of continuing high gas prices. Though prices have dropped in the last two weeks, the average price per gallon remains above $4.80.
Survey methodology: Ipsos, which surveyed 919 respondents online on June 27 and 28, 2022, provided the results exclusively to Forbes Advisor. The survey is conducted weekly to track consumer sentiment over time, using a series of 11 questions to determine whether consumers feel positively or negatively about the current state of the economy and where it looks to be going in the future.
