Every Dollar Gets a Job as Financial Pressure Builds

Consumers under the greatest financial pressure are not simply spending less. They are becoming more selective about where every dollar goes.

That shift appears in “The Inflation Mirage: What Rising Spending Hides About Consumer Demand,” the June edition of the PYMNTS Consumer Expectations Index. The report finds that higher prices, rather than stronger demand, are driving most recent spending growth. In April, prices accounted for about 0.4 percentage points of the 0.5% monthly increase in consumer spending, while the actual volume of purchases rose just 0.1 percentage points. Consumers are paying more without taking home much more.

The report, based on a June survey of 2,028 U.S. adults, shows how households are adapting to that pressure. Many consumers still feel secure about their jobs, which has helped support overall spending. At the same time, flat income, thinner savings and higher prices are forcing financially strained households to redraw their budgets.

The changes are most visible in discretionary services, including restaurants, entertainment and travel:

53% of consumers who live paycheck to paycheck and struggle to pay bills said they spent less on nonessential services during the past year. Only 23% said they spent more.

41% of paycheck-to-paycheck consumers who can pay their bills without difficulty said they reduced nonessential spending. Twenty-seven percent increased it.

30% of consumers who do not live paycheck to paycheck said they increased spending on nonessentials, slightly more than the 27% who cut back.

Those figures show a consumer economy moving at different speeds. Financially comfortable households can continue remodeling homes, planning trips or making large purchases. Consumers with less room in their budgets are concentrating their money on groceries, gas, utilities and other basic costs.

The adjustment resembles packing a suitcase with a strict weight limit. Consumers keep what they need most and leave behind purchases that feel optional. That discipline may help households stay current on bills even as prices remain elevated.

Some consumers are also adding income rather than relying only on cuts. Between 19% and 25% of consumers across financial groups reported doing side work or occasional jobs. Among financially struggling side workers, 64% use that money to cover basic living costs, compared with 25% of side workers who do not live paycheck to paycheck.

The pressure remains significant. Forty-three percent of consumers who struggle to pay bills could not cover a $1,200 emergency within one week, and 68% have enough savings to last one month or less. Still, the spending data also show consumers actively managing the strain. They are cutting optional expenses, seeking extra income and protecting essential payments, steps that can provide a measure of stability while they wait for prices and household finances to improve.

At PYMNTS Intelligence, we work with businesses to uncover insights that fuel intelligent, data-driven discussions on changing customer expectations, a more connected economy and the strategic shifts necessary to achieve outcomes. With rigorous research methodologies and unwavering commitment to objective quality, we offer trusted data to grow your business. As our partner, you’ll have access to our diverse team of PhDs, researchers, data analysts, number crunchers, subject matter veterans and editorial experts.