Consumers are pinched and leaning on debt

Prices are still high, and Americans feel the pinch. Even as the latest numbers point to an inflation slowdown relative to last year, the economy remains far off the Fed’s inflation target. Interest rates are at their highest point in 22 years.

That’s a lot of economic pressure on consumers, who have been living through generationally high prices coming out of the acute pandemic period. How are Americans coping, and what does that mean for the future?

Below in five charts, we examine how Americans are handling the current macroeconomic conditions.

1. One trillion. The long tail of inflation is still being felt by many. Look at the data. Average monthly credit card balances reached $1 trillion. These balances have increased at an accelerated pace since inflation started to pick up last year. At the same time, Americans’ saving accounts have dwindled as inflation has eaten away at their cushion. This is a precarious place for consumers and the economy they drive. Will the bubble burst? We will see.
2. Credit crunch. With lower savings and higher prices, how are Americans coping with the economy? Many are leaning on personal debt in the form of higher balances through their credit cards.
3. Main Issue. All these macroeconomic numbers add up to one main worry for Americans: inflation. Despite inflation easing in recent months from the generational highs last year, Americans are still feeling and reeling from the high prices. Many still cite inflation as their main worry. It is inflation, inflation, inflation.
4. Lukewarm at best. Consumer confidence remains in a middling spot, with jobs and expectations for the future high (although muted compared to pre-pandemic), even as people’s material reality feels less rosy. Some parts of consumers’ experience with the economy have jumped to pre-pandemic levels of optimism, while others lag behind. Americans are feeling bullish about their job and their future. Yet, consumers aren’t feeling confident about the state of the current economy and their ability to invest; these mixed signals ground consumer confidence in an in-between spot. America is in limbo.
5. Regressive tax. The unenthusiastic state of consumer confidence isn’t affecting everyone the same. Many lower-income Americans feel more pessimistic about the current economy and their investments than more affluent Americans. However, people across the board remain more upbeat about the future and their jobs. What happens if that falls apart? Again, we will see.

The state and future of the economy remain a huge question mark hanging over our collective heads. Will the economy keep muddling along, improve in fits and starts, or take a turn for the worse? The signals remain mixed, but consumer spending and borrowing are big red flags on things to come.