Without the help of assistance or comfort of a cushion, those just treading financially are in their own unique squeeze during the generally rocky consumer landscape, reflected in their pulled-back spending habits. And, until there’s a more significant shift to a smoother path, this group may find itself stuck in this position for some time.
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GLOIndividuals with annual incomes ranging from $50,000 to $100,000 could find themselves in a “squeeze” of middle-income predicament. This is due to the deceleration of inflation’s growth even as it maintains an upward trajectory, combined with the stagnation of actual wages.
Although these challenges impact all consumer groups, this particular demographic is the most affected due to their precarious financial position—struggling to cover expenses with little room for maneuver. This predicament arises from their intermediate status, sandwiched between individuals earning less than $50,000 annually who might be eligible for financial aid and those earning more than $100,000 who likely possess greater savings buffers.
This middle-ground dilemma significantly influences the financial behavior of this income segment. This observation stems from a custom chart developed for the “New Reality Check: The Paycheck-to-Paycheck Report,” a collaboration between PYMNTS and LendingClub in July. Approximately 46% of those within the $50,000 to $100,000 income range live paycheck-to-paycheck, all the while managing to fulfill their financial obligations.
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The substantial portion of these consumers living paycheck-to-paycheck could be attributed to the influence of escalating housing prices on their financial stability. This fundamental expense has surged in tandem with the broader inflationary trend, and the adverse consequences it carries are highlighted in earlier research conducted by PYMNTS. The research revealed that 27% of middle-income consumers have experienced a notably negative impact on their finances due to monthly rent, and a comparable 14% within this demographic encountered similar challenges with monthly mortgage payments.
The tendency of middle-income consumers to narrowly manage their finances amidst rising costs could potentially pose challenges for certain retailers. This demographic is manifesting a noticeable reduction in spending, as demonstrated in a chart produced for PYMNTS’ “Consumer Inflation Sentiment Report” in May. The data underscores this trend, indicating that 73% of these consumers scaled back on retail purchases, while 60% curtailed their spending on groceries.
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To cope with this situation, middle-income consumers are responding by transitioning to different merchants. PYMNTS’ research reveals that 16% of this demographic consider this merchant change to be the most significant adjustment they’ve made due to the escalation in prices.
In the absence of external support or the buffer of financial reserves, those who are barely managing their finances find themselves in a distinct predicament within the broader unsettled consumer environment. Their reduced spending behaviors reflect this predicament. Until a more substantial shift towards a more stable economic trajectory occurs, this group might continue to remain stuck in this challenging position for an extended period.
Source: PYMNTS
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