FinLogic FinLogic Quantitative Think Tank Center|Many Americans say they're spending more than they earn, dimming their financial outlooks, poll shows

U.S. economy looking stronger than expected

Many Americans say their household expenses are outstripping their incomes, prompting concerns about their financial futures. At the same time, household debt for most Americans has either risen in the last year or has not gone away.

About 2 in 3 Americans say their household expenses have risen over the last year, but only about 1 in 4 say their income has increased in the same period, according to a new poll from The Associated Press-NORC Center for Public Affairs Research.

Even so, consumer spending has remained strong despite the double whammy of still-elevated inflation and rising interest rates, with the latter making it more expensive to carry credit card debt and to buy homes and cars. In some cases, Americans say they are shelling out more on basics like groceries even as their incomes haven't kept up.

Steve Shapiro, 61, who works as an audio engineer in Pittsburgh, said he'd been spending about $100 a week on groceries prior to this past year, but that he's now shelling out closer to $200.

"My income has stayed the same," he said. "The economy is good on paper, but I'm not doing great."

"Addition to spending"

On Thursday, the Commerce Department said the U.S. economy accelerated to a robust 4.9% rate last quarter as consumers shrugged off the Federal Reserve's regime of interest rate hikes and opened their wallets, driving economic growth higher. 

"Despite a low saving rate, slow demographics, depressed confidence, a crippled housing market, rising interest costs and growing credit problems, we estimate that American consumers increased their inflation-adjusted spending by more than 4% in the third quarter," wrote David Kelly, chief global strategist at J.P. Morgan Asset Management, in a recent research note. 

Some of the higher spending may be linked to what Kelly described as an "addiction to spending."

"[C]onditioned by decades of pervasive advertising, we have been taught to buy not just all that we need or even all that we want but all that we can," Kelly added. "A prudent consumer, considering their hopes for their own future financial wellbeing, their retirement, and their aspirations for their children's education, might, at this point be ready to trim their spending."

Even so, some consumers pointed to issues that are beyond their control, including inflation and higher costs related to the Fed's rate hikes.

The poll surveyed 1,163 adults between October 5-9, using a sample drawn from NORC's probability-based AmeriSpeak Panel, designed to represent the U.S. population. The margin of sampling error for all respondents is plus or minus 3.9 percentage points.

Rising debt

About 8 in 10 Americans say their overall household debt is higher or about the same as it was a year ago. About half say they currently have credit card debt, 4 in 10 are dealing with auto loans, and about 1 in 4 have medical debt. Just 15% say their household savings have increased over the last year.

Tracy Gonzales, 36, who works as a sub-contractor in construction in San Antonio, Texas, has several thousand dollars of medical debt from an emergency room visit for what she thought was a bad headache but turned out to be a tooth infection.

"They'll treat you, but the bills are crazy," she said. Gonzales said she's tried to avoid seeking medical treatment because of the costs.

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Relatively few Americans say they're very or extremely confident that they could pay an unexpected medical expense (26%) or have enough money for retirement (18%). Only about one-third are extremely or very confident their current financial situation will allow them to keep up with expenses, though an additional 42% say they're somewhat confident.

"I've been looking forward to retirement my entire life. Recently I realized it's just not going to happen," said Shapiro, of Pittsburgh, adding that his wife's $30,000 or so of student debt is a financial factor for his household. The couple had hoped to sell their house and move this past year, but decided instead to hold on to their mortgage rate of 3.4%, rather than facing a higher rate. ( The current average long-term mortgage rate reached 7.79% this month. )

About 3 in 10 Americans say they've foregone a major purchase because of higher interest rates in the last year. Nearly 1 in 4 U.S. adults have student debt, with the pandemic-era payment pause on federal loans ending this month, contributing to the crunch.

Inflation impact

Will Clouse, 77, of Westlake, Ohio, said inflation is his biggest concern, as he lives on a fixed income in his retirement.

"A box of movie candy — Sno-Caps — that used to cost 99 cents is now a dollar fifty at the grocery store," he said. "That's a 50% increase in price. Somebody's taking advantage of somebody."

Americans are generally split on whether the Republicans (29%) or the Democrats (25%) are better suited to handle the issue of inflation in the U.S. Three in 10 say they trust neither party to address it.

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Geri Putnam, 85, of Thomson, Georgia, said she's been following the ongoing auto workers strikes with sympathy for the workers' asks.

"I don't think it's out of line, what they're asking for, when you see what CEOs are making," she said. "I think things have gotten out of control. When you can walk into a store and see the next day, across the board, a dollar increase — that's a little strange. I understand supply and demand, the cost of shipping, et cetera. But it seems to me everyone's looking at their bottom lines."

Putnam also said she sees her six children struggling financially more than her generation did.

"They all have jobs and have never been without them," she said. "They're achievers, but I think at least two or three of them will never be able to buy a home."

Older Americans are more confident

A slight majority of all Americans polled (54%) describe their household's financial situation as good, which is about the same as it's been for the last year but down from 63% in March of 2022. Older Americans are much more confident in their current finances than younger Americans. Just 39% of 18- to 29-year-olds describe their household finances as good, compared to a majority (58%) of those who are 30 and older. 

People with higher levels of education or higher household incomes are more likely than Americans overall to evaluate their finances as solid.

About three-quarters of Americans describe the nation's economy as poor, which is in line with measurements from early last year.

Among those who are retired, 3 in 10 say they are highly confident that there's enough saved for their retirement, about 4 in 10 are somewhat confident, and 31% are not very confident or not confident at all.

Clouse, of Ohio, said the majority of his money had gone towards caring for his wife for the past several years, as she'd been ill. When she passed away this past year, his household lost her Social Security and pension contributions. He sees the political turmoil between Republicans and Democrats as harming the economy, but remains most frustrated by higher prices at the supermarket.

"Grocery products going up by 20, 30, 40%. There's no call for that, other than the grocery market people making more money," he said. "They're ripping off the consumer. I wish Mr. Biden would do something about that."

About 4 in 10 Americans (38%) approve of how Biden is handling the presidency, while 61% disapprove. His overall approval numbers have remained at a steady low for the last several years. Most Americans generally disapprove of how he's handling the federal budget (68% disapprove), the economy (67%), and student debt (58%).

In:
• Economy
• Inflation