Households earning $100K or more are cutting their spending more aggressively. What’s going on?

Marketwatch.com ^ | Jan. 19, 2023 | Zoe Han

[fluorescence]

Consumer spending slowed and household finances weakened across all income levels last month. But households earning $100,000 a year or more reported shaving more off their spending than less well-off households did, according to a report released this week by Morning Consult, a decision intelligence company.

The report also found that real monthly spending among U.S. adults fell by 4.3% from November to December. Even so, 21.3% of U.S. adults said their monthly expenses exceeded their monthly income in December, up from 19.2% in November. 

On average, households earning $100,000 a year or more said they spent about 10% less in real terms in December than they did the previous month. Households earning $50,000 to $99,999 and those earning less than $50,000 a year, meanwhile, reported that they cut their monthly spending bills by no more than 5% on average. 

Across the board, households are cutting back on recreation, alcohol, vehicle insurance, and other services in December, while spending more on hotels, gas and airfares, the report found.

One theory on the spending cutbacks: Higher earners typically have more discretionary income, and likely have decided to exercise more fiscal caution after seven interest-rate hikes by the Federal Reserve last year. (On Wednesday, St. Louis Fed President James Bullard told The Wall Street Journal in a live-streamed interview that the Federal Reserve should not “stall” on raising its benchmark rates until they are above 5%.)

The Morning Consult report did cite inflationary pressures. “Heightened budgetary pressures brought on by persistently high inflation are forcing trade-offs for consumers, leading to reallocation across categories,” it said. “For instance, as food grew more expensive over the past year, U.S. households accommodated an increase in grocery purchases by spending less at restaurants.

[moviefan8]

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[OpusatFR]

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[GaltAdonis]

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