Households earning $100,000 or more cut spending more aggressively.  What is going on?

Households earning $100,000 or more cut spending more aggressively. What is going on?

We want to hear from readers who have stories to share about the effects of rising costs and changing economies. If you want to share your experience, write to Please include your name and the best way to reach you. A journalist can be in contact.

High-income households are feeling the pinch of inflation.

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

The report also found that real monthly spending by American adults fell 4.3% from November to December. Even so, 21.3% of American 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 reported spending about 10% less in real terms in December than the previous month. Households earning between $50,000 and $99,999 and those earning less than $50,000 a year, meanwhile, said they reduced their monthly expenses by no more than 5% on average.

Overall, households cut entertainment, alcohol, car insurance and other services in December, while spending more on hotels, gasoline and airline tickets, the report said.

A theory about spending cuts: High-income earners generally have more discretionary income and likely decided to be more fiscally prudent after seven interest rate hikes by the Federal Reserve last year. (St. Louis Fed President James Bullard told the Wall Street Journal in a livestreamed interview on Wednesday that the Federal Reserve should not “delay” raising its benchmark rates until that they are greater than 5%.)

The Morning Consult report cited inflationary pressures. “Increased fiscal pressures caused by persistently high inflation are forcing consumers to compromise, leading to reallocation between categories,” he said. “For example, as food has become more expensive over the past year, American households have coped with increased grocery purchases by spending less at restaurants.”

At the start of last year, high-income households led consumer spending in the face of rising prices, said Kayla Bruun, economic analyst at Morning Consult and co-author of the report. But household income, even for those earning six-figure incomes, hasn’t grown fast enough to keep up with inflation, she said.

“They probably started realizing, ‘Hey, I can’t keep buying the same basket of goods every month and expect to keep growing my savings,'” Bruun told MarketWatch.

At the same time, recent layoffs in higher-paying tech and financial sectors may also have affected sentiment among wealthier households, Bruun said.

The technology and financials sectors have felt the impact of rising interest rates and economic headwinds, she added. Goldman SachsGS,
and BlackRock BLK,
said earlier this month they were cutting jobs. Microsoft Corp. MSFT,
on Wednesday confirmed plans to lay off some 10,000 workers, or around 5% of the company’s global workforce.

Prior to Microsoft’s announcement, data compiled by the website estimated that more than 25,000 global technology workers were laid off in the first weeks of 2023. Last year, around 60,000 people in the tech industry have been laid off, according to Challenger, Gray and Christmas.

Nevertheless, there was some good news: Inflation fell in December for the sixth consecutive month: The annual inflation rate fell to 6.5% from 7.1% in November after hitting a high of 9 .1% in four decades last summer.

Read also :

Microsoft will lay off 10,000 workers. If you get fired from your tech job, what should your next move be?

Inflation is hitting rural, Hispanic, and black populations the hardest for one key reason

High medical costs caused more Americans to delay care last year

#Households #earning #cut #spending #aggressively

Leave a Comment

Your email address will not be published. Required fields are marked *