Despite falling inflation rates, many U.S. consumers continue to feel that the cost of everyday necessities, including retail products, is rising, according to an exclusive report from PYMNTS Intelligence. This perception is particularly strong among consumers who live paycheck to paycheck, especially those who struggle to pay their monthly bills.

Despite falling inflation rates, many U.S. consumers, especially those living paycheck to paycheck, still perceive rising costs for essentials. With 63 percent of consumers living paycheck to paycheck in July 2024, many are adjusting their spending by opting for less expensive alternatives. Financial stress has led to a rise in conscious consumer behavior.

After peaking at 9.1 percent in July 2022, inflation has gradually declined, settling at 3 percent in the first half of 2024. Inflation rates for clothing have fallen to one of the lowest levels. Despite this, 70 percent of consumers believe their income has not kept pace with inflation, prompting many to adjust their shopping habits by switching to cheaper or lower-quality alternatives, according to the New Reality Check: The Paycheck-to-Paycheck Report.

Data shows that in July 2024, 63 percent of consumers lived paycheck to paycheck, up slightly from 62 percent in July 2023. Notably, the share of consumers struggling to pay their monthly bills has increased 2 percentage points to 23 percent since July 2023. This increase in financial stress has been accompanied by a decline in the share of consumers living paycheck to paycheck who can easily pay their bills, from 44 percent in May 2024 to 40 percent in July 2024.

Consumers’ perceptions of inflation are higher than the actual rate of inflation, especially among people with greater financial constraints. Most consumers report that prices for basic necessities have increased over the past year, even in areas where inflation has declined. Those living paycheck to paycheck are most likely to believe their income has not kept pace with inflation. 77 percent of those struggling to pay their bills say their income does not offset inflation or only partially offsets it.

As a result of these financial pressures, nearly all consumers living paycheck to paycheck and perceiving rising costs have adjusted their spending habits. Many have switched to cheaper retailers or products or have begun to consume less, especially in categories like groceries and retail. In fact, 37 percent of grocery shoppers have taken a minimalist approach and decided to buy fewer treats, while 42 percent of retail shoppers have become bargain hunters.

A smaller but growing group of consumers, particularly those under financial pressure, have adopted more conscious consumption behaviors, focusing on community-oriented and sustainable approaches such as trading, bartering, or reusing items. Among consumers who live paycheck to paycheck, these conscious approaches are becoming more common. Compared to their financially secure counterparts, these consumers are three times more likely to compromise on quality and almost twice as likely to develop a conscious consumption mindset.

Newsroom of Fibre2Fashion (DP)