Consumer confidence in purchases remains high despite rising inflation – Forbes Advisor
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Despite widespread shortages of everything from gasoline to Chick-Fil-A sauce, not to mention rising inflation, consumers still feel confident in their finances and their ability to shop.
According to the Forbes Advisor-Ipsos Consumer Confidence Weekly Tracker, 52% of consumers say they are more comfortable making major purchases at home than six months ago.
Overall confidence in finances and the economy remains statistically unchanged from last week (60.6 out of 100). The survey, conducted by Ipsos, measures consumer sentiment over time.
Consumers are ready to shop despite shortages and inflation across the country
Overall confidence levels show Americans, in general, are confident in their current financial situation, even though Department of Labor data released Wednesday showed consumer prices were rising at their fastest pace in over a decade.
As inflation rose at the highest rate in April since September 2008, consumers did not seem out of step with the price hike: used car and truck prices jumped 10% in April, the strongest increase in a month since the ministry began tracking these data in 1953. Gas prices in April rose 50% year over year.
Read more: Why is inflation rising right now?
According to this week’s Forbes Advisor-Ipsos tracker, more than half of consumers say they are more comfortable making major household purchases, including a home or car, compared to six months ago. Fifty-seven percent are more comfortable doing other household purchases than six months ago.
“I read this as US consumer sentiment remaining stable at a relatively high level,” said Chris Jackson, senior vice president of public affairs at Ipsos. “The slight rebound in household shopping comfort indicates that, despite reports of shortages and inflation, most Americans still feel fairly well about their ability to meet their daily needs.
The survey shows that confidence falters as income levels fall, indicating more evidence of the economic recovery leaving some cohorts behind. Only 39% of consumers who earn less than $ 50,000 a year said they were more comfortable making major purchases than six months ago; 54% of those making between $ 50,000 and $ 100,000 said the same.
Despite reopens, evidence of a K-shaped recovery continues
The vaccination campaign in the United States has continued across the country, with more than 35% of the population fully vaccinated and 47% having received at least one dose. A recent ABC News analysis of data from the Centers for Disease Control and Prevention shows a correlation between the vaccination rate and declining Covid-19 cases across the country as state and local economies reopen and begin to rebound.
But not everyone is reaping the benefits of reopening the economy. While consumer confidence is high overall, a closer look at the demographics reveals that the K-shaped recovery – where the well-to-do make a full recovery, while lower-status Americans are left behind – persists.
Non-white Americans have seen some of the biggest drops in overall consumer sentiment this week, indicating they feel less confident about their financial situation. The demographic consumer confidence index fell 3.7 points this week to 57.4; White Americans’ confidence level is five points higher at 62.4. Those earning less than $ 50,000 a year saw a decline of 2.1 points, and young Americans between the ages of 18 and 34 saw a decline of 2.6 points.
The K-shaped recovery – which means different parts of the economy are recovering at different rates – is a phenomenon economists have warned as a lasting consequence of the pandemic. On Treasury Secretary Janet Yellen’s first day in office in January, she warned of the pandemic that was exacerbating an already K-shaped economy.
“Long before COVID-19 infected a single individual, we lived in a K-shaped economy, an economy where wealth relied on wealth while certain segments of the population fell further and further back,” we read in Yellen’s statement.
The Biden administration has been furiously pushing for proposals to raise the middle and lower income classes.
Biden’s most recent proposal, the American Families Plan (AFP), would notably expand the Child Tax Credit (CTC) until 2025. Previous CTC changes were implemented in the latest stimulus plan and now guarantee monthly payments to eligible households. The Institute on Taxation and Economic Policy, a non-profit, non-partisan tax policy organization, estimates that families in the lowest 20% earning percentile would receive an income increase of $ 4,520 in 2022 through to the only enlarged CTC.
Related: Child Tax Credit Calculator: Who Qualifies?
Such proposals entail significant costs and political obstacles. AFP is reportedly costing $ 1.8 trillion in its current form, and political analysts expect virtually no Republican to support such spending, especially after the latest stimulus package cost $ 1.9 trillion .
It is possible that AFP is going through the process of budget reconciliation, where only a simple majority of Democrats is needed to make the bill law. But the process requires parliamentary approval from the Senate, which means every Democrat would have to agree – two crucial factors whose viability is already becoming uncertain.
Survey methodology: Ipsos, which surveyed 928 respondents online on May 11-12, 2021, 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 positive or negative about the current state of the economy and its future. .