Twenty-seven percent of Americans are pulling money out of their savings accounts to keep spending, and 54 percent of that group is using that money to meet basic living expenses, an Ipsos poll has found.
Sixty-four percent of Americans now live paycheck to paycheck, unable to save, according to a report by online lender Lending Tree, up from 61 percent a year ago.
The new figure matches a peak set in March 2020, CNBC reported.
Americans also have been using their credit cards to meet monthly expenses, as we reported in “Credit Card Debt Nears $1 Trillion, Sets Record” (7 Feb 2023). The average interest rate on cards was 20.4 percent in last year’s third quarter, Federal Reserve data shows.
More Americans feel financially insecure than at the end of December, the Ipsos poll found, and with good reason.
Average hourly pay shrank 0.2 percent in January from December and 1.8 percent from a year ago, according to a Bureau of Labor Statistics analysis that factors inflation into the figures.
“There’s a great deal of economic risk right now and if you’re borrowing from your future or someone else to cover expenses, an economic slowdown could be worse for you than it has to be,” Howard Dvorkin, chair of Debt.com, warned in a CNBC interview.
TRENDPOST: Household savings swelled during the COVID War when people had far fewer opportunities to spend.
As the COVID War eased, people began spending again, as we reported in “Consumer Spending Rebounds. What Next?” (22 Feb 2022) and other articles.
As inflation raged on, people kept spending, eventually swapping saving for spending, which we noted in “U.S. Consumers Keep On Spending as Savings Rate Plummets” (31 May 2022).
Unable to help themselves, consumers more recently began tapping those fattened savings accounts to keep buying, a shift we highlighted in “Americans: Spending More, Saving Less” (7 Jun 2022).
TREND FORECAST: We wrote in “Credit Card Debt Nears $1 Trillion, Sets Record,” (7 Feb 2023) that as interest rates rise and adjustable-rate credit cards adjust upward, more Americans will begin to miss payments, resulting in canceled cards, ruined credit, and revenue lost to banks.
As banks have with mortgages, card issuers will become much more selective and demanding in determining who qualifies as a cardholder. Many cardholders will be denied requests for limit increases, find their credit limits reduced, or see their cards canceled.
Consumer spending makes up more than two-thirds of the U.S. economy. As shoppers lose their ability to spend, the economy will bog down, pushing the country and, therefore, the world toward Dragflation: declining economic growth and rising inflation.