The surge in prices over the past year has hit many people in their wallets. Average wages rose slightly, but not enough to keep pace with inflation, which peaked in June at a 40-year high of 9.1%.
One group of Americans has suffered particularly: Middle-income families, who have had to stop saving as much or dip into past savings to get by, financial services firm Primerica found in a survey. An overwhelming 82% of middle-income households have reduced the amount of money they are saving or reaching into existing savings to compensate for the decline in their income in the last three months of 2022 due to higher living costs.
“High inflation stings for everyone, but it’s especially painful for middle-income American families,” Amy Crews Cutts, an economic adviser to Primerica and one of the authors of the research report, said in a statement Friday.
“With prices rising at the fastest pace in a generation, the middle market is now spending their savings to make ends meet. Even so, the majority of middle-income families are optimistic about their future and show remarkable resilience in the face of economic headwinds,” he added.
For the survey, people in households making $30,000 to $100,000 a year were interviewed about their financial situation. It also looked at the monthly prices of food, gas and utilities within the consumer price index (CPI), a commonly used economic indicator for individual-level recessions.
Primerica’s analysis found that CPI for food, gas and utilities rose 10.7% compared with 7.1% for the broader CPI category which also includes non-essential purchases such as cars and computer.
To deal with inflated prices, respondents said they would reduce or stop spending altogether in the coming months. In the fourth quarter, 39% of middle-income households said they had started taking such steps in preparation for next year.
The report finds that inflation has pushed up wages, helping middle earners offset some of the impact of inflation. In the first quarter of 2022, wages increased by 1.4% from the previous quarter, which marked the largest jump since 2001. But even if households benefited from the increase in income, it was not enough to offset the price increase.
According to the survey, households tended to spend more than estimated to save. While only 15% of households said they would spend more in the fourth quarter, more than double that number, 33% ended up spending more.
But middle-income families are trying to adjust to rising costs. Nearly three-quarters of households surveyed said they are holding back on non-essential spending, while another 47% said they are putting off spending on car or home maintenance.
“Families are well aware of the potential economic risks for the year ahead and are taking proactive steps to reduce the impact on their financial future,” said Peter W. Schneider, president of Primerica.
This story was originally published on Fortune.com
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