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According to a new poll by CNBC and Morning Consult, nearly all Americans are cutting their spending in some way.
The survey found that 92% of Americans hold back, which is further evidence of what retailers love WalmartAnd GoalAnd Home Depot And best buy It described cautious shifts in consumer spending during the first quarter.
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Shoppers continue to report inflation squeezing their finances, with concerns growing especially among middle-income Americans. Among the survey’s respondents, 92% of middle-income Americans — or those who earn between $50,000 and $100,000 a year — reported being “somewhat” or “very” concerned about price increases.
This is a higher proportion than those in the low- and high-income groups, with 88% of each of these segments reporting feeling concerned about rising prices. Somewhat bright spot: That share of high-income households, represented by those earning $100,000 or more annually, is an improvement from last year when 92% expressed concern about inflation, according to the survey.
A woman searches for products at a department store in New York City, January 26, 2023.
Leonardo Munoz | Corbis News | Getty Images
The survey found that over the past six months, higher prices have led nearly 80% of consumers to cut spending on non-essential goods, such as entertainment, home décor, clothing, appliances, and more.
Moreover, two-thirds of respondents report that they spend less on essential items, such as groceries, utilities, and gas. In the grocery category, more than half of consumers said they buy cheaper alternatives, such as private label brands, or buy less in general.
“Customers continue to chase value given the impact of inflation,” Wal-Mart CEO Doug McMillon said on the retailer’s first-quarter earnings call. “Private brand penetration is up about 110 basis points versus last year for Walmart US.” A basis point is one-hundredth of a percentage point.
Spending in value-oriented grocery stores in May exceeded spending in the overall grocery sector, according to Bank of America aggregated credit and debit card spending data.
“We believe this reflects lower trading from higher incomes, in line with commentary from Grocery Outlet and Walmart,” Bank of America Securities analyst Robert Omes said.
Moreover, consumers do not expect spending habits to change for the rest of the year.
Two-thirds of respondents to the CNBC and Morning Consult poll said they still plan to cut spending on essential items over the next six months, and 77% plan to cut spending on non-discretionary items, slightly lower than those who said they had already cut in that area.
The CNBC and Morning Consult poll was conducted online earlier this month and included more than 4,400 adults.
Categories that are experiencing withdrawals
Among the categories hardest hit by spending cuts caused by inflation, clothing came in first place as non-essential consumers dropped, with 63% reporting buying less since the start of 2023.
Walmart and Target, the nation’s largest multi-category retailers, both reported seeing weakness in apparel spending in the first quarter.
A woman searches for products at a department store on January 26, 2023 in New York City. The gross domestic product of the United States increased at an annual rate of 2.9% in the fourth quarter of 2022.
Leonardo Munoz | Corbis News | Getty Images
While spending based on experience – particularly travel – has held up better than buying goods this year, the survey found that spending in bars and restaurants was the second most likely non-essential category to see cuts, with 62% reporting less spending.
Total monthly spending on restaurants slowed in May from April, according to credit and debit card data from Bank of America. The Fast Food segment continued to slow in spending, Casual Dining saw dollars decrease month over month, and Pizza in particular continued to decline year over year.
Spending on outdoor entertainment, including concerts, was slightly better, with 58% of consumers reporting they’d cut back on spending there, according to a CNBC-Morning Consult survey.
Meanwhile, more than half of Americans say they’ve cut back on major household-related spending such as renovations or appliances.
“We’re seeing more of a ‘break, fix and replace’ rather than an upgrade (in hardware) and less sensitivity to these individual discretionary, larger priced items,” Ted Dekker, CEO of Home Depot to CNBC prior to Investor Day Tuesday.
Nearly half of the respondents said they spend less on electronics such as computers and phones. This decline was most pronounced among low-income Americans, where two-thirds of the group fell out of this category.
Customers are making trade-offs, Best Buy CEO Cory Barry said after the company’s first-quarter earnings report.
“Not every industry sees exactly the same customer behavior because the customer is in control and makes trade-off decisions based on how this inflation affects them personally,” Barry said.
— CNBC’s Harriet Taylor contributed to this report.
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