TransUnion’s Consumer Pulse study reports increase in plans to reduce discretionary spending
Two in three Americans (64%) report being extremely or very concerned about inflation, according to TransUnion’s latest Consumer Pulse study. Nine in 10 (93%) expressed that they are at least slightly concerned. The results from the Feb. 7-15 survey of 2,949 adults were released today, just weeks after the Consumer Price Index – a measure of inflation – experienced its largest 12-month increase in 40 years at the end January.
Six in 10 (62%) consumers say they are going to make changes to their purchasing behavior because of inflation. Of this group, 45% say they are going to decrease discretionary spending. In addition to inflation, grocery availability, new COVID-19 variants, product availability and rising interest rates rank as the top five concerns for Americans in 2022. While these rankings hold true for most generations, Gen Z is the only outlier with inflation ranked first, followed by COVID-19 variants, access to healthcare, grocery availability and rising interest rates.
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Overall, in the next three months, more households reported plans to reduce rather than increase discretionary spending on dining out, travel and entertainment (37%), large purchases such as appliances and cars (30%) and retail shopping for clothing, electronics and durable goods (30%). At the same time, they plan to increase spending on paying bills and loans such as utilities and credit cards (34%), medical care (27%) and retirement funds/investing (26%).
“It’s clear that inflation is impacting the way consumers spend their money. However, our findings show clear signs that many consumers are taking measures that will set them up for future success, such as paying down loans or increasing their investments,” said Charlie Wise, senior vice president and head of global research and consulting for TransUnion. “Despite inflation and other worries such as rising interest rates and supply chain woes, consumers are performing relatively well. Consumer credit performance continues to be strong and unemployment rates remain low.”
A sign that inflation hasn’t fully muted consumer optimism: most Americans (81%) reported that household income increased or stayed the same in the past three months compared to just 19% who experienced a decrease. And 91% expect household income to stay the same or increase in the next 12 months.
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The Consumer Pulse study also found that consumers seeking to take control of their financial future look for credit information regularly. Most Americans (64%) believe monitoring credit is important and 63% report monitoring their credit at least monthly.
Americans appear aware of the impact different data has on their credit score. In fact, 44% of people believe their credit score would increase if businesses used information not found on a standard credit report, like rental payments, short-term loan payments and buy now, pay later loans.
“While there’s no direct link between inflation and a person’s credit score, rising interest rates could increase total loan costs. Plus, rising prices of goods could mean consumers are more reliant on credit products for their bills and day-to-day spending,” said Margaret Poe, head of consumer credit education at TransUnion. “When inflation increases, the usual advice for healthy credit holds: Make sure to keep your balances as low as you can and do your best to make your payments on time. If at any point you think you’re at risk of missing a payment, contact your lender as soon as you can to explain your situation.”