Cutting Back: How Americans Are Really Dealing With Inflation

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There was a time during the pandemic when many of us believed we were getting back to normal. People were vaccinated and even boosted, mask mandates had disappeared in most states, and there was a general feeling that the worst was behind us.

There was just one problem: the economy was far from normal. While inflation had been historically low from 2012 and all through 2020, it started to tick up in April 2021, rising to 4.2%. For perspective, the average inflation rate from 1960 to 2021 was 3.8%. Inflation has increased every month since April 2021, reaching 8.6% in May 2022. That’s the highest rate since 1981, according to a CNBC report.

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Most of the current rise in inflation is in the energy sector, specifically in fuel costs. The greater context here is the war in Ukraine started by Russia.

And yet, while energy prices are driving the current bout of inflation, many Americans are cutting back across the board. In fact, a GOBankingRates survey found that the greatest number are cutting back on dining out even though prices there haven’t risen as much. Let’s take a closer look at where Americans are cutting back and where they are tightening their financial belts the most.

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Where Americans Are Cutting Back

Even though some of these expenses could be considered necessities, many of the 2,357 people who responded to the GOBankingRates survey are cutting back in these areas.

Dining Out

Among those surveyed, more than one-third said they are cutting back on dining out. That is by far the largest group and is more than twice the percentage of the next-largest group. Interestingly, the cost of food at home has been rising faster than the cost of food away from home, according to BLS data. For the unadjusted 12 months ended May 2022, food at home increased by 11.9%. Meanwhile, food away from home increased by 7.4%.

The latter percentage is still high, historically speaking. Nevertheless, it highlights the fact that dining out tends to be one of the first items that many Americans cut from their budgets when costs rise.

Travel

Mask and even testing requirements have slowly vanished for people traveling both domestically and abroad, but despite the fewer hurdles to clear while traveling, some people are deciding to stay home. In fact, 16% of GOBankingRates survey respondents said they are cutting back on travel.

Of course, surging fuel costs will make a difference in whether many Americans decide to travel. Likewise, prices for used cars and trucks may have cooled a bit in recent months, but nevertheless have a 16.1% 12-month price change, according to the BLS.

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Airfare, too, has been spiking as some people resume travel. According to a CBS report, the price of a plane ticket is about 14% higher than it was last year.

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Groceries

Groceries are something none of us can go without, but 13% of survey respondents say they are cutting back in this area. It may not be possible to avoid buying groceries entirely, but some people are resorting to cost-cutting measures when they shop.

For example, rising meat prices may cause some consumers to consider plant-based and dairy options instead, according to CNBC. The leading cost-cutting measure is simply taking fewer trips to the grocery store. Behind that is shopping generic brands and buying in bulk.

Gas

Some survey respondents are cutting back on gas, but that only makes up 10%. That is the smallest group, not including those who responded “other,” and we see this even though gasoline costs are up a staggering 48.7% over the past 12 months, according to the BLS data. Overall, energy costs are up 34.6% over the same period.

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Although some people might be reducing how much gas they use for discretionary purposes, such as dining out and travel, the reality is that most people need gas for their daily lives. Most of us can’t drive to work or do any of our daily duties without gas, so most people aren’t cutting back in this area — despite surging costs.

Many Americans Haven’t Cut Back

Cost might be surging in many areas, but 18% of GOBankingRates survey respondents said they aren’t cutting back at all. That represents the second-largest group, after those who are cutting back on dining out. Yes, it might be surprising to find that nearly one-fifth of respondents aren’t cutting back at all even though costs are spiking so much in some areas.

However, it’s important to remember that inflation doesn’t affect everyone equally. For example, middle income earners and young people are the most affected, according to a report from TD Bank. The report found that those in the middle 40% of income faced an 8.6% rate of inflation, based on data from January 2022. Meanwhile, those in the lowest 20% and the highest 20% had inflation rates of 8.0% and 8.3%, respectively.

There’s also the notion that those who aren’t cutting back simply aren’t doing so yet — but will if inflation continues to rise or last for an extended period of time.

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About the Author

Bob Haegele is a personal finance writer who specializes in topics such as investing, banking and credit cards. He left his day job in 2019 to pursue his passion for helping people get out of debt and build wealth. You can find his work at outlets such as Business Insider, Forbes Advisor and SoFi.

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