How You Can Stick To A Budget And Save Money. According to a research that was publish this week in the United States, a greater number of respondents said in December that their monthly spending exceed their monthly income.
One possible explanation for the decrease in consumer spending is that higher incomes, who normally have more income available for discretionary expenditure, have likely made the decision to be more frugal after the Federal Reserve raised interest rates seven times in the past year.
The effects of inflation are becoming more noticeable in households with higher incomes.
Last month, households of all income levels experienced a worsening of their financial situations, which led to a slowdown in consumer expenditure. A survey that was published this week by Morning Consult, a company that specializes in decision intelligence, found that households with an annual income of $100,000 or more reported cutting their expenditure more than households with a lower level of financial security did.
In addition, the survey discovered that between November and December, adults in the United States reduced their real monthly spending by 4.3%. Despite this, 21.3% of persons in the United States reported in December that their monthly expenses were more than their monthly income, which is an increase from 19.2% in November.
The majority of households reporting an annual income of $100,000 or more reported cutting their spending by approximately 10% in real terms in December, compared to the previous month. On the other hand, households reporting an annual income of $50,000 to $99,999 and those reporting an annual income of less than $50,000 said that they reduced their monthly spending expenses by no more than 5% on average.
According to the findings of the survey, throughout the month of December, households are increasing their spending on hotels, gas, and airfares while decreasing their expenditures on recreational activities, alcoholic beverages, and other services.
One possible explanation for the decrease in consumer spending is that higher incomes, who normally have more income available for discretionary expenditure, have likely made the decision to be more frugal after the Federal Reserve raised interest rates seven times in the past year. (During an interview with The Wall Street Journal that was live-streamed on Wednesday, the President of the Federal Reserve Bank of St. Louis, James Bullard, stated that the Federal Reserve should not “pause” on raising its benchmark rates until they are over 5%.)
Inflationary pressures were mention in the report that was produce by Morning Consult. According to the report, “heightened budgetary strains brought on by consistently rising inflation are compelling consumers to trade-offs, leading to reallocation across categories.” “For example, as the cost of food increased over the course of the previous year, families in the United States were able to absorb an increase in grocery purchases by spending less money at restaurants.”
How You Can Stick To A Budget And Save Money
According to Kayla Bruun, an economic analyst with Morning Consult and co-author of the research, higher-income households led the way in consumer spending at the beginning of the previous year in spite of rising costs. However, she stated that the growth of household income, especially for those who make earnings in the six-figure range, has not been sufficient to keep up with the growth of inflation.
“They presumably started to think, ‘Hey, I can’t keep buying the same basket of things each month and expect to continue adding to my savings,'” Bruun told MarketWatch. “They probably started to realize that I can’t keep buying the same basket of goods each month.”
According to Bruun, recent layoffs in higher-earning tech and financial sectors may also have affected attitude among wealthy households.
This is something that needs further investigation.
She went on to say that the technology and finance industries were among those who felt the effects of rising interest rates and other economic challenges. At the beginning of this month, both Goldman Sachs GS, +0.48% and BlackRock BLK, -2.34% announced that they would be reducing headcount. On Wednesday, Microsoft Corporation MSFT, -1.65% announced that it intends to lay off approximately 10,000 employees, which is comparable to approximately 5% of the company’s workforce around the world.
Prior to the announcement made by Microsoft, statistics that was collated by the website Layoffs.fyi estimated that more than 25,000 employees working in the worldwide tech sector had been laid off in the first few weeks of 2023. According to Challenger, Gray & Christmas, in the technology industry around 60,000 workers lost their jobs during the course of the previous year.
Nevertheless, there is some encouraging news to report: The annual rate of inflation decreased to 6.5% in December from 7.1% in November, after reaching a four-decade-high of 9.1% last summer. This marks the sixth consecutive month that inflation has decreased since November.